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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Fiscal Year Ended December 31, 2001
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to _________
Commission File No. 0-25766
Community Bank Shares of Indiana, Inc.
(Exact Name of Registrant as Specified in its Charter)
Indiana 35-1938254
_______ __________
(State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification Number
101 West Spring Street, New Albany, Indiana 47150
(Address of Principal Executive Offices) Zip Code
Registrant's telephone number, including area code: (812) 944-2224
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
(Title of Class)
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 twelve months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
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.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, computed by reference to the asked price of $17.25 per share of such
stock as of March 27, 2002, was $42,104,783. (The exclusion from such amount of
the market value of the shares owned by any person shall not be deemed an
admission by the Registrant that such person is an affiliate of the Registrant.)
As of March 27, 2002, there were issued and outstanding 2,440,857 shares of the
Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Parts II and IV of Form 10-K - Annual Report to Stockholders for the fiscal year
ended December 31, 2001.
Part III of Form 10-K - Proxy Statement for the 2002 Annual Meeting of
Stockholders.
________________________________________________________________________________
Form 10-K
Index
Page
____
Part I:
Item 1. Business 3
Item 2. Properties 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 Stock and Related Stockholder Matters 11
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 11
Part III:
Item 10. Directors and Executive Officers of the Registrant 12
Item 11. Executive Compensation 12
Item 12. Security Ownership of Certain Beneficial Owners and Management 12
Item 13. Certain Relationships and Related Transactions 12
Part IV:
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 13
Signatures 16
______________________________________________________________________________________________
PART I
ITEM 1. BUSINESS
General
Community Bank Shares of Indiana, Inc. (the "Company") is a multi-bank holding
company headquartered in New Albany, Indiana. The Company's wholly-owned banking
subsidiaries are Community Bank of Southern Indiana (CBSI) and Community Bank of
Kentucky (CBKY). Until March 1, 2002, the Company also operated two bank
branches in Clark County, Indiana under the name Heritage Bank of Southern
Indiana (HBSI). On March 1, 2002, HBSI was merged with and into CBSI. CBSI and
CBKY are state-chartered stock commercial banks headquartered in New Albany,
Indiana and Bardstown, Kentucky, respectively, and at times are referred to
herein collectively as the "Banks". CBSI is regulated by the Indiana Department
of Financial Institutions and the Federal Deposit Insurance Corporation. CBKY is
regulated by the Kentucky Department of Financial Institutions and the Federal
Deposit Insurance Corporation.
CBSI was founded in 1934 as a federal mutual savings and loan association. CBSI
converted to a federal mutual savings bank in 1989, and became a federal stock
savings bank on May 1, 1991. On December 2, 1996, CBSI converted from a federal
stock savings bank to a state chartered stock commercial bank. CBSI's deposits
have been federally insured since 1934 by the Savings Association Insurance Fund
("SAIF") and its predecessor, the Federal Savings and Loan Insurance
Corporation. CBSI has been a member of the Federal Home Loan Bank system since
1934.
On May 6, 1998, the Company completed its acquisition of CBKY (formerly NCF Bank
and Trust CO) located in Bardstown, Kentucky through a merger with NCF Financial
Corporation (NCF). CBKY, a state chartered commercial bank with total assets of
$37.0 million and $35.6 million at May 6, 1998, and December 31, 1997,
respectively, became a wholly-owned subsidiary of the Company through the
exchange of 740,974 shares of the Company's common stock for all the outstanding
common stock of NCF. The acquisition was accounted for as a pooling of
interests.
The Company had total assets of $429.6 million, total deposits of $255.9
million, and stockholders' equity of $42.4 million as of December 31, 2001. The
Company's principal executive office is located at 101 West Spring Street, New
Albany, Indiana 47150, and the telephone number at that address is (812)
944-2224. The Company's Website is www.cbinonline.com.
Business Strategy
The Company's current business strategy is to operate well-capitalized,
profitable and independent community banks with a significant presence in their
primary market areas. The Company has sought to implement this strategy in
recent years by: (1) emphasizing the origination of residential mortgage loans,
commercial business & real estate loans, and consumer loans in the Company's
primary market area; (2) controlling operating expenses; and (3) broadening the
scope of services offered to its customers.
The Company's three subsidiaries are community-oriented financial institutions
offering a variety of financial services to their local market areas. The
subsidiaries are engaged primarily in the business of attracting deposits from
the general public and using such funds to originate 1) secured and unsecured
business loans of various terms to local businesses and professional
organizations, and 2) consumer loans including home equity lines of credit,
automobile and recreational vehicle, construction loans, and loans secured by
deposit accounts. Depending on each subsidiary's liquidity, interest rate risk
and balance sheet positions, fixed-rate mortgage loans are originated either for
inclusion in the retained loan portfolio or for sale in the secondary market,
while adjustable rate mortgage (ARM) loans are originated primarily for
retention in each subsidiary's loan portfolio. To a lesser extent, the
subsidiaries make home equity loans secured by the borrower's principal
residence and other types of consumer loans such as auto loans. Although CBSI
holds a small amount of multi-family residential real estate loans in its
portfolio, the Company does not emphasize the origination of such loans. In
addition, the Company invests in mortgage-backed, U.S. Government and agency,
and state and municipal securities.
The Company continues to actively originate fixed-rate mortgage loans, generally
with terms to maturity of between 15- to 30- years and secured by one-to-four
family residential properties. One-to-four family fixed-rate loans generally are
originated for sale in the secondary mortgage market. The Company sells mortgage
loans with servicing either retained or released. The Company earns service fee
income on those loans where servicing is retained.
Residential Real Estate Loans. The Company originates one-to-four family,
owner-occupied, residential mortgage loans secured by property located in the
Company's market area primarily for sale in the secondary market. The majority
of the Company's residential mortgage loans consists of loans secured by
owner-occupied, single family residences. The Company currently offers
residential mortgage loans for terms up to 30 years, with adjustable or fixed
interest rates. Origination of fixed-rate mortgage loans versus ARM loans is
monitored continuously and is affected significantly by the level of market
interest rates, customer preference, and loan products offered by the Company's
competitors. Therefore, even if management's strategy is to emphasize ARM loans,
market conditions may be such that there is greater demand for fixed-rate
mortgage loans.
________________________________________________________________________________
3.
The primary purpose of offering ARM loans is to make the Company's loan
portfolio more interest rate sensitive. However, as the interest income earned
on ARM loans varies with prevailing interest rates, such loans do not offer the
Company predictable cash flows as would long-term, fixed-rate loans. ARM loans,
however, can carry increased credit risk associated with potential higher
monthly payments by borrowers as general market interest rates increase. It is
possible, therefore, that during a period of rising interest rates, the risk of
default on ARM loans may increase due to the upward adjustment of interest costs
to the borrower.
The Company's fixed-rate mortgage loans are amortized on a monthly basis with
principal and interest due each month. Residential real estate loans often
remain outstanding for significantly shorter periods than their contractual
terms because borrowers may refinance or prepay loans at their option.
The Company's ARM loans generally adjust annually with interest rate adjustment
limitations of two percentage points per year and six percentage points over the
life of the loan. The Company also makes ARM loans with interest rates that
adjust every one, three or five years. Under the Company's current practice, the
interest rate on new ARM loans is initially derived from the one-year,
three-year or five-year U.S. Treasury Constant Maturity Index plus a spread. The
Company's policy is to qualify borrowers for one-year ARM loans based on the
initial interest rate plus the maximum annual rate increase.
The Company has used different indices for its ARM loans such as the National
Average Median Cost of Funds, the Sixth District Net Cost of Funds Monthly
Index, the National Average Contract Rate for Previously Occupied Homes, the
Average three year Treasury Bill Rate, and the Eleventh District Cost of Funds.
Consequently, the adjustments in the Company's portfolio of ARM loans tend not
to reflect any one particular change in any specific interest rate index, but
general interest rate trends overall.
Regulations limit the amount that a bank may lend via conforming loans
qualifying for sale in the secondary market in relationship to the appraised
value of the real estate securing the loan, as determined by an appraisal at the
time of loan origination. Such regulations permit a maximum loan-to-value ratio
of 95 percent for residential property and from 65 to 90 percent for all other
real estate related loans. The Company's lending policies, however, generally
limit the maximum loan-to-value ratio on both fixed-rate and ARM loans to 80
percent of the lesser of the appraised value or the purchase price of the
property to serve as security for the loan, unless insured by a private mortgage
insurer.
The Company occasionally makes real estate loans with loan-to-value ratios in
excess of 80 percent. For real estate loans with loan-to-value ratios of between
80 and 90 percent, the Company requires the first 20 percent of the loan to be
covered by private mortgage insurance. For real estate loans with loan-to-value
ratios of between 90 percent and 95 percent, the Company requires private
mortgage insurance to cover the first 25 to 30 percent of the loan amount. The
Company requires fire and casualty insurance, as well as title insurance or an
opinion of counsel regarding good title, on all properties securing real estate
loans made by the Company.
Construction Loans. The Company originates loans to finance the construction of
owner-occupied residential property. The Company makes construction loans to
private individuals for the purpose of constructing a personal residence or to
local real estate builders and developers. Construction loans generally are made
with either adjustable or fixed-rate terms of up to six months. Loan proceeds
are disbursed in increments as construction progresses and as inspections
warrant. Construction loans are structured to be converted to permanent loans
originated by the Company at the end of the construction period or to be
terminated upon receipt of permanent financing from another financial
institution.
Commercial Real Estate Loans. The Company's commercial real estate loans are
secured by improved property such as offices, small business facilities,
apartment buildings, nursing homes, warehouses and other non-residential
buildings, most of which are located in the Company's primary market area and
most of which are to be used or occupied by the borrowers. Commercial real
estate loans have been offered at adjustable interest rates and at fixed rates
with balloon provisions at the end of the term financing. The Company continues
to originate commercial real estate loans, commercial real estate construction
loans and land loans.
Loans secured by commercial real estate generally involve a greater degree of
risk than residential mortgage loans and carry larger loan balances. This
increased credit risk is a result of several factors, including the
concentrations of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income producing properties, and the
increased difficulty of evaluating and monitoring these types of loans.
Furthermore, the repayment of loans secured by multifamily and commercial real
estate is typically dependent upon the successful operation of the related real
estate project. If the cash flow from the project is reduced, the borrower's
ability to repay the loan may be impaired. The Company has increased its
origination of multi-family residential or commercial real estate loans over the
last few years, but believes, based on currently available information, that it
is adequately protected against the increased credit risk associated with these
loans through its underwriting standards of imposing stringent loan-to-value
ratios, requiring conservative debt coverage ratios, and continually monitoring
the operation and physical condition of the collateral.
Commercial Business Loans. The Company also originates non-real estate related
business loans to local small businesses and professional organizations. This
type of commercial loan has been offered at both variable rates and fixed rates
with balloon payments required at maturity. The Company has increased its
origination of commercial business loans over the last few years. Such loans
generally have shorter terms and higher interest rates than mortgage loans.
However, commercial business loans also involve a higher level of credit risk
because of the type and nature of the collateral.
________________________________________________________________________________
4.
Consumer Loans. The principal types of consumer loans offered by the Company are
equity lines of credit, auto loans, home improvement loans, and loans secured by
deposit accounts. Equity lines of credit are predominately made at rates which
adjust periodically and are indexed to the prime rate. Some consumer loans are
offered on a fixed-rate basis depending upon the borrower's preference. The
Company's equity lines of credit are generally secured by the borrower's
principal residence and a personal guarantee.
The underwriting standards employed by the Company for consumer loans include a
determination of the applicant's credit history and an assessment of ability to
meet existing obligations and payments on the proposed loan. The stability of
the applicant's monthly income may be determined by verification of gross
monthly income from primary employment, and additionally from any verifiable
secondary income. Credit worthiness of the applicant is of primary
consideration, however. The underwriting process also includes a comparison of
the value of the security in relation to the proposed loan amount.
Loan Solicitation and Processing. Loan originations are derived from a number of
sources such as loan sales staff, real estate broker referrals, existing
customers, borrowers, builders, attorneys and walk-in customers. Processing
procedures are affected by the type of loan requested and whether the loan will
be funded by the Company or sold into the secondary market.
Mortgage loans that are sold into the secondary market are submitted, when
possible, for Automated Underwriting, which allows for faster approval and an
expedited closing. The Company's responsibility on these loans is the
fulfillment of the loan purchaser's requirement. These loans often have reduced
underwriting features and may be made without an appraisal or credit report at
the option of the purchaser. A review signature is required to signify
compliance with the terms of the commitment. Loans that are reviewed in a more
traditional manner, which are mostly loans held for the Company's own portfolio,
require credit reports, appraisals, and income verification before they are
approved or disapproved. These loans must be reviewed by two designated Company
officials who then make a decision on whether to extend credit. Loans funded by
the Company that exceed GNMA maximum loan values require approval by the
President of the subsidiary bank extending the loan. Private mortgage insurance
is required on all loans with a ratio of loan to appraised value of greater than
80%. Property insurance and flood certifications are required on all real estate
loans.
Installment loan documentation varies by the type of collateral offered to
secure the loan. In general, an application and credit report is required before
a loan is submitted for underwriting. The underwriter determines the necessity
of any additional documentation, such as income verification or appraisal of
collateral. An authorized loan officer approves or disapproves the loan after
review of all applicable loan documentation collected during the underwriting
process.
Commercial loans are underwritten by the commercial loan officer who makes the
initial contact with the customer applying for credit. The underwriting of these
loans are reviewed after the fact for compliance to the Company's general
underwriting standards. Loans exceeding the authority of the underwriting loan
officer are presented to a loan committee for approval or disapproval.
Loan Commitments. The Company issues standby loan origination commitments to
qualified borrowers primarily for the construction and purchase of residential
real estate and commercial real estate. Such commitments are made with specified
terms and conditions for periods of up to 60 days, during which time the
interest rate is locked-in. If a loan is not scheduled to close immediately
after approval, the Company charges a fee for a loan commitment based on a
percentage of the loan amount. The loan commitment fee is credited towards the
closing costs of the loan if the borrower receives the loan from the Company. If
the potential borrower chooses to borrow funds from another institution, the
commitment fee is nonrefundable.
Employees
As of December 31, 2001, the Company had 141 employees, 122 full-time and 19
part-time. CBSI employed 41 full-time and 9 part-time employees, HBSI employed
19 full-time and 1 part-time employee, and CBKY employed 12 full-time and 3
part-time employees as of December 31, 2001. None of these entity's employees
are represented by a collective bargaining group. Neither the Company nor any
subsidiary has ever experienced a work stoppage.
Competition
The banking business is highly competitive, and as such the affiliate banks
compete not only with other commercial banks, but also with savings and loan
associations, trust companies and credit unions for deposits and loans, as well
as stock brokerages, insurance companies, and other entities providing one or
more of the services and products offered by the Banks. In addition to
competition, the Company's business and operating results are significantly
affected by the general economic conditions prevalent in its market area.
The Banks' primary market area consists of the counties of Floyd, Clark and
Harrison, which are located in Southern Indiana along the Ohio River, and Nelson
County, which is located approximately 40 miles southeast of Louisville,
Kentucky. Clark, Floyd, and Harrison counties are three of the seven counties
comprising the Louisville, Kentucky Standard Metropolitan Statistical Area,
which has a population in excess of one million. The aggregate population of
Floyd, Clark and Harrison counties is approximately 203,000. The population of
Nelson County is approximately 37,000. Counties surrounding Nelson County
include: Spencer, Anderson, Hardin, Washington, Marion, Larue, and Bullitt
counties, which together have a population in excess of 220,000. The Company's
headquarters are in New Albany, Indiana, a city of 48,000 located approximately
three miles from the center of Louisville.
________________________________________________________________________________
5.
Regulation and Supervision
As a bank holding company, the Company is regulated under the Bank Holding
Company Act of 1956, as amended (the "Act"). The Act limits the business of bank
holding companies to banking, managing or controlling banks and other
subsidiaries authorized under the Act, performing certain servicing activities
for subsidiaries and engaging in such other activities as the Board of Governors
of the Federal Reserve System ("Federal Reserve Board") may determine to be
closely related to banking. The Company is registered with and is subject to
regulation by the Federal Reserve Board. Among other things, applicable statutes
and regulations require the Company to file an annual report and such additional
information as the Federal Reserve Board may require pursuant to the Act and the
regulations which implement the Act. The Federal Reserve Board also conducts
examinations of the Company.
The Act provides that a bank holding company must obtain the prior approval of
the Federal Reserve Board to acquire more than 5 percent of the voting stock or
substantially all the assets of any bank or bank holding company. The Company
currently has no formal agreement or commitments about any such transaction.
However, the Company evaluates opportunities to invest in or acquire other banks
or bank holding companies as they arise and may engage in these transactions in
the future. The Act also provides that, with certain exceptions, a bank holding
company may not (i) engage in any activities other than those of banking or
managing or controlling banks and other authorized subsidiaries, or (ii) own or
control more than 5 percent of the voting shares of any company that is not a
bank, including any foreign company. In addition, the Federal Reserve Act
restricts the Bank's extension of credit to the Company.
A bank holding company is permitted, however, to acquire shares of any company,
the activities of which the Federal Reserve Board has determined to be so
closely related to banking or managing or controlling banks as to be a proper
incident thereto. The Federal Reserve Board's regulations state specific
activities that are permissible under that exception. The Company does not
currently have any agreements or commitments to engage in any nonbanking
activities.
In approving acquisitions by bank holding companies of banks and companies
engaged in banking-related activities, the Federal Reserve Board considers
whether any such activity by an affiliate of the holding company can reasonably
be expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh any possible
adverse effects such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. The Federal
Reserve Board has cease-and-desist powers over parent holding companies and
nonbanking subsidiaries if their actions constitute a serious threat to the
safety, soundness, or stability of a subsidiary bank.
A bank holding company may also acquire shares of a company which furnishes or
performs services for a bank holding company and acquire shares of the kinds and
in the amounts eligible for investment by national banking associations. In
addition, under the financial modernization legislation enacted by Congress in
November 1999, a bank holding company that meets the eligibility requirements
and elects to be a financial holding company may engage in expanded financial
activities and acquire companies engaged in those activities, such as securities
underwriters and dealers and insurance companies. The Board of Directors of the
Company at this time has no plans for these investments or broader financial
activities.
On November 12, 1999, Congress enacted the Gramm-Leach-Bliley Act (previously
known as the Financial Services Modernization Act of 1999). The
Gramm-Leach-Bliley Act permits bank holding companies to qualify as "financial
holding companies" that may engage in a broad range of financial activities,
including underwriting, dealing in and making a market in securities; insurance
underwriting and agency activities; and merchant banking. The Federal Reserve
Board is authorized to expand the list of permissible financial activities. The
Gramm-Leach-Bliley Act also authorizes banks to engage through financial
subsidiaries in nearly all of the activities permitted for financial holding
companies. The Company has not elected the status of financial holding company.
The Gramm-Leach-Bliley Act also imposes significant new financial obligations
and reporting requirements on banks as well as on other financial institutions.
Among other things, financial institutions are required to (a) establish privacy
policies and disclose them to customers both at the time of establishing the
customer relationship and on an annual basis, and (b) permit customers to opt
out of the financial institution's disclosure of customer nonpublic personal
information to third parties that are not affiliated with the financial
institution.
As state chartered commercial banks, CBSI and CBKY are subject to examination,
supervision and extensive regulation by the FDIC and their respective
Departments of Financial Institutions (the "DFIs"). CBSI is a member of and owns
stock in the FHLB of Indianapolis, while CBKY is a member of and owns stock in
the FHLB of Cincinnati. The FHLB institutions located in Indianapolis and
Cincinnati are each one of the twelve regional banks in the Federal Home Loan
Bank System. CBSI and CBKY are also subject to regulation by the Federal Reserve
Board, which governs reserves to be maintained against deposits and regulates
certain other matters. The extensive system of banking laws and regulations to
which the Banks are subject are intended primarily for the protection of their
customers and depositors, and not shareholders.
________________________________________________________________________________
6.
The FDIC and the DFIs regularly examine the Banks and prepare a report for the
consideration of each Bank's Board of Directors on any deficiencies that it may
find in their operations. The relationship with its depositors and borrowers
also is regulated to a great extent by both federal and state laws, especially
in such matters as the ownership of savings accounts and the form and content of
the Banks' mortgage documents.
Federal Regulation of Commercial Banks. The FDIC has extensive authority over
the operations of all insured commercial banks. As part of this authority, the
Banks are required to file periodic reports with the FDIC and the DFIs and are
subject to periodic examinations by both agencies. In the course of these
examinations, the examiners may require the Banks to provide for higher general
loan loss reserves. (Financial institutions in various regions of the United
States have been called upon by examiners to write down assets to their fair
market values and to establish increased levels of reserves, primarily as a
result of perceived weaknesses in real estate values and a more restrictive
regulatory climate).
The investment and lending authority of a state-chartered bank is prescribed by
federal laws and regulations, and such banks are prohibited from engaging in any
activities not permitted by such laws and regulations. These laws and
regulations generally are applicable to all state chartered banks.
CBSI is subject to the same current national bank limits on maximum loans to one
borrower; it may not lend to a single or related group of borrowers on an
unsecured basis an amount in excess of the greater of $500,000 or 15 percent of
the bank's unimpaired capital and surplus. An additional amount may be lent,
equal to 10 percent of unimpaired capital and surplus, if such loan is secured
by readily marketable collateral, which is defined to include certain
securities, but generally does not include real estate. CBKY is subject to legal
lending limits of 20 percent of unimpaired capital and surplus for unsecured
loans and 30 percent of unimpaired capital and surplus for secured loans.
Federal Regulations
Sections 22(h) and (g) of the Federal Reserve Act place restrictions on loans to
executive officers, directors and principal stockholders. Under Section 22(h),
loans to a director, an executive officer and to a greater than 10% stockholder
of a bank, and certain affiliated interests of either, may not exceed, together
with all other outstanding loans to such person and affiliated interests, the
institution's loans to one borrower limit (generally equal to 15% of the
institution's unimpaired capital and surplus). Section 22(h) also requires that
loans to directors, executive officers and principal stockholders be made on
terms substantially the same as offered in comparable transactions to other
persons and also requires prior board approval for certain loans. In addition,
the aggregate amount of extensions of credit to all insiders cannot exceed the
institution's unimpaired capital and surplus. At December 31, 2001 the Banks
were in compliance with the above restrictions.
Safety and Soundness. The Federal Deposit Insurance Act ("FDIA"), as amended by
the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and
the Riegle Community Development and Regulatory Improvement Act of 1994,
requires the federal bank regulatory agencies to prescribe standards, by
regulations or guidelines, relating to the internal controls, information
systems and internal audit systems, loan documentation, credit underwriting,
interest-rate-risk exposure, asset growth, asset quality, earnings, stock
valuation and compensation, fees and benefits and such other operational and
managerial standards as the agencies may deem appropriate. The federal bank
regulatory agencies adopted, effective August 9, 1995, a set of guidelines
prescribing safety and soundness standards pursuant to FDICIA, as amended. In
general, the guidelines require, among other things, appropriate systems and
practices to identify and manage the risks and exposures specified in the
guidelines.
If an insured depository institution or its holding company fail to meet any of
the standards promulgated by regulation, then such institution or company will
be required to submit a plan within 30 days to the FDIC specifying the steps it
will take to correct the deficiency. In the event that an institution or company
fails to submit or fails in any material respect to implement a compliance plan
within the time allowed by the agency, Section 39 of the FDIA provides that the
FDIC must order the institution or company to correct the deficiency and may (1)
restrict asset growth; (2) require the institution or company to increase its
ratio of tangible equity to assets; (3) restrict the rates of interest that the
institution or company may pay; or (4) take any other action that would better
carry out the purpose of prompt corrective actions.
The FDIC generally is authorized to take enforcement action against a financial
institution that fails to meet its capital requirements; such action may include
restrictions on operations and banking activities, the imposition of a capital
directive, a cease and desist order, civil money penalties or harsher measures
such as the appointment of a receiver or conservator or a forced merger into
another institution. In addition, under current regulatory policy, an
institution that fails to meet its capital requirements is prohibited from
paying any dividends. Except under certain circumstances, further disclosure of
final enforcement action by the FDIC is required.
Prompt Corrective Action. Under Section 38 of the FDIA, as amended by the
FDICIA, each federal banking agency was required to implement a system of prompt
corrective action for institutions which it regulates. The federal banking
agencies, including the FDIC, adopted substantially similar regulations to
implement Section 38 of the FDIA, effective as of December 19, 1992. Under the
regulations, an institution is deemed to be (i) "well-capitalized" if it has
total risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio
of 6.0% or more, has a Tier 1 leverage capital ratio of 5.0% or more and is not
subject to any order or final capital directive to meet and maintain a specific
capital level for any capital measure, (ii) "adequately-capitalized" if it has a
total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital
ratio of 4.0% or more and a Tier 1 leverage capital ratio of 4.0% or more (3.0%
under certain circumstances) and does not meet the definition of "well
capitalized," (iii) "undercapitalized" if it has a total risk-based capital
ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less
than 4.0% or a Tier 1 leverage capital ratio that is less than 4.0% ( 3.0% under
certain circumstances), (iv) "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital
ratio that is less than 3.0% or a Tier II average capital ratio that is less
than 3.0%, and (v) "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to or less than 2.0%. Section 38 of the
FDIA and the regulations promulgated thereunder also specify circumstances under
which a federal banking agency may reclassify a well capitalized institution as
adequately capitalized and may require an adequately capitalized institution or
an undercapitalized institution to comply with supervisory actions as if it were
in the next lower category (except that the FDIC may not reclassify a
significantly undercapitalized institution as critically undercapitalized). At
December 31, 2001, the Company and each of the subsidiary Banks was deemed
well-capitalized for purposes of the above regulations.
________________________________________________________________________________
7.
Federal Home Loan Bank System. CBSI is a member of the FHLB of Indianapolis, and
CBKY is a member of the FHLB of Cincinnati. The FHLB of Indianapolis and the
FHLB of Cincinnati are each one of the 12 regional FHLB's that, prior to the
enactment of FIRREA, were regulated by the Federal Home Loan Bank Board (FHLBB).
FIRREA separated the home financing credit function of the FHLB's from the
regulatory functions of the FHLB's regarding savings institutions and their
insured deposits by transferring oversight over the FHLB's from the FHLBB to a
new federal agency, the Federal Home Financing Board ("FHFB").
As members of the FHLB Banking system, each of CBSI and CBKY is required to
purchase and maintain stock in the FHLB in an amount equal to the greater of one
percent of its aggregate unpaid residential mortgage loans, home purchase
contracts or similar obligations at the beginning of each year, or 1/20 (or such
greater fraction as established by the FHLB) of outstanding FHLB advances. At
December 31, 2001, $5.9 million, $900,000, and $888,000 of FHLB stock were
outstanding for CBSI, HBSI, and CBKY, respectively, which was in compliance with
this requirement. In past years, CBSI, HBSI, and CBKY have received dividends on
their FHLB stock.
Certain provisions of FIRREA require all 12 FHLB's to provide financial
assistance for the resolution of troubled savings institutions and to contribute
to affordable housing programs through direct loans or interest subsidies on
advances targeted for community investment and low-and moderate-income housing
projects. These contributions could cause rates on the FHLB advances to increase
and could affect adversely the level of FHLB dividends paid and the value of
FHLB stock in the future.
Each FHLB serves as a reserve or central bank for its members within its
assigned region. It is funded primarily from proceeds derived from the sale of
consolidated obligations of the FHLB System. It makes loans to members (i.e.,
advances) in accordance with policies and procedures established by the board of
directors of the FHLB. At December 31, 2001, the Company had $89 million in
advances from the FHLB.
Accounting. An FDIC policy statement applicable to all banks clarifies and
re-emphasizes that the investment activities of a bank must be in compliance
with approved and documented investment policies and strategies, and must be
accounted for in accordance with generally accepted accounting principles. Under
the policy statement, management must support its classification of and
accounting for loans and securities (i.e., whether held to maturity, available
for sale or available for trading) with appropriate documentation. The Banks are
in compliance with these amended rules.
Insurance of Accounts. Each Bank's deposits are insured up to $100,000 per
insured member (as defined by law and regulation). Deposits of CBSI and CBKY are
insured by the Savings Association Insurance Fund (SAIF), while HBSI's deposits
assumed by CBSI upon the merger of HBSI into CBSI are insured by the Bank
Insurance Fund (BIF). This insurance is backed by the full faith and credit of
the United States Government. The SAIF and the BIF are both administered and
managed by the FDIC. As insurer, the FDIC is authorized to conduct examinations
of and to require reporting by SAIF and BIF insured institutions. It also may
prohibit any insured institution from engaging in any activity the FDIC
determines by regulation or order to pose a serious threat to either fund. The
FDIC also has the authority to initiate enforcement actions against financial
institutions. The annual assessment for deposit insurance is based on a
risk-related premium system. Each insured institution is assigned to one of
three capital groups: well capitalized, adequately capitalized or under
capitalized. Within each capital group, institutions are assigned to one of
three subgroups (A, B, or C) on the basis of supervisory evaluations by the
institution's primary federal supervisor and if applicable, state supervisor.
Assignment to one of the three capital groups, coupled with assignment to one of
three supervisory subgroups, will determine which of the nine risk
classifications is appropriate for an institution. Institutions are assessed
insurance rates based on their assigned risk classifications. The well
capitalized, subgroup "A" category institutions are assessed the lowest
insurance rate, while institutions assigned to the under capitalized subgroup
"C" category are assessed the highest insurance rate. As of December 31, 2001
the subsidiary banks were assigned to the well-capitalized, subgroup "A"
category. During 2001, CBSI, HBSI and CBKY paid an annual insurance rate of 1.9
cents per $100 of deposits.
In August 1995, the FDIC substantially reduced the deposit insurance premiums
for well-capitalized, well-managed financial institutions that are members of
the BIF. Under the new assessment schedule, approximately 92% of BIF members
paid a minimum assessment of $1,000 per year while SAIF members continued to be
assessed under the existing rate schedule of 23 cents to 31 cents per $100 of
insured deposits.
________________________________________________________________________________
8.
On September 30, 1996, all SAIF member institutions were charged a one-time
assessment to increase SAIF's reserves to $1.25 per $100 of insured deposits.
The aggregate one-time assessment paid by CBSI and CBKY amounted to $1.3 million
with an after tax impact of approximately $779,000.
The FDIC may terminate the deposit insurance of any insured depository
institution if it determines, after a hearing, that the institution has engaged
or is engaging in unsafe or unsound practices, is in an unsafe or unsound
condition to continue operations or has violated any applicable law, regulation,
order or any condition imposed by an agreement with the FDIC. The FDIC also may
suspend deposit insurance temporarily for any financial institution during the
hearing process for the permanent termination of insurance, if the Bank has no
tangible capital. If insurance of accounts is terminated, the insured accounts
at the institution at the time of the termination, less subsequent withdrawals,
shall continue to be insured for a period of six months to two years, as
determined by the FDIC.
The FDIC has passed regulations, under the FDIA, that generally prohibit
payments to directors, officers and employees contingent upon termination of
their affiliation with an FDIC-insured institution or its holding company (i.e.,
"golden parachute payments") if the payment is received after or in
contemplation of, among other things, insolvency, a determination that the
institution or holding company is in "troubled condition", or the assignment of
a composite examination rating of "4" or "5" for the institution. Certain types
of employee benefit plans are not subject to the prohibition. The regulations,
which are not currently applicable to the Company, would also generally prohibit
certain indemnification payments regarding any administrative proceeding
instituted against a person that results in a final order pursuant to which the
person is assessed civil money penalties or subjected to other enforcement
action. The Company has no such agreements with any directors or employees.
The Federal Reserve System. The Federal Reserve Board requires all depository
institutions to maintain reserves against their transaction accounts and
non-personal time deposits. As of December 31, 2001, no reserves were required
to be maintained on the first $5.5 million of transaction accounts, reserves of
3% were required to be maintained against the next $41.3 million of net
transaction accounts (with such dollar amounts subject to adjustment by the
Federal Reserve Board), and a reserve of 10% (which is subject to adjustment by
the Federal Reserve Board to a level between 8% and 14%) against all remaining
net transaction accounts. Because required reserves must be maintained in the
form of vault cash or a non-interest-bearing account at a Federal Reserve Bank,
the effect of this reserve requirement is to reduce an institution's earning
assets.
Banks are authorized to borrow from the Federal Reserve Bank "discount window,"
but Federal Reserve Board regulations require banks to exhaust other reasonable
alternative sources of funds, including FHLB advances, before borrowing from the
Federal Reserve Bank.
Federal Taxation. For federal income tax purposes, the Company and its
subsidiaries file a consolidated federal income tax return on a calendar year
basis. Consolidated returns have the effect of eliminating intercompany
distributions, including dividends, from the computation of consolidated taxable
income for the taxable year in which the distributions occur.
The Company and its subsidiaries are subject to the rules of federal income
taxation generally applicable to corporations under the Internal Revenue Code of
1986, as amended (the "Code").
The Company is subject to the corporate alternative minimum tax which is imposed
to the extent it exceeds the Company's regular income tax for the year. The
alternative minimum tax will be imposed at the rate of 20 percent of a specially
computed tax base. Included in this base will be a number of preference items,
including the following: (i) 100 percent of the excess of a financial
institution's bad debt deduction over the amount that would have been allowable
on the basis of actual experience; (ii) interest on certain tax-exempt bonds
issued after August 7, 1986; and (iii) for years beginning in 1988 and 1989 an
amount equal to one-half of the amount by which a institution's "book income"
(as specially defined) exceeds its taxable income with certain adjustments,
including the addition of preference items (for taxable years commencing after
1989 this adjustment item is replaced with a new preference item relating to
"adjusted current earnings" as specially computed). In addition, for purposes of
the new alternative minimum tax, the amount of alternative minimum taxable
income that may be offset by net operating losses is limited to 90 percent of
alternative minimum taxable income.
The Company has not been audited by the Internal Revenue Service for the past
ten years.
Indiana Taxation. Effective January 1, 1990, the State of Indiana imposed a
franchise tax assessed on the net income (adjusted gross income as defined in
the statute) of financial institutions. The new tax replaced the gross receipts
tax, excise tax and supplemental net income tax imposed prior to 1990. This new
financial institution's tax is imposed at the rate of 8.5 percent of the
Company's adjusted gross income. In computing adjusted gross income, no
deductions are allowed for municipal interest, U.S. Government interest and
pre-1990 net operating losses. The Company's state franchise tax returns have
been audited through the tax year ended December 31, 1997.
In 2000, the Indiana financial institution tax law was amended to treat resident
financial institutions the same as nonresident financial institutions by
providing for apportionment of Indiana income based on receipts in Indiana. This
revision allowed for the exclusion of receipts from out of state sources and
federal government and agency obligations.
________________________________________________________________________________
9.
ITEM 2. PROPERTIES
The Company conducts its business through its corporate headquarters located in
New Albany, Indiana. CBSI operates a main office and eight branch offices in
Clark and Floyd Counties, Indiana, while CBKY operates a main office and one
branch in Nelson County, Kentucky. The following table sets forth certain
information concerning the main offices and each branch office at December 31,
2001. The aggregate net book value of premises and equipment was $11.2 million
at December 31, 2001.
Location Year Opened Owned or Leased
Community Bank of Southern Indiana:
101 West Spring St. - Main Office 1937 Owned
New Albany, IN 47150
401 East Spring St. - Drive Thru for Main Office 2001 Owned
New Albany, IN 47150
2626 Charlestown Road 1995 Owned
New Albany, IN 47150
480 New Albany Plaza 1974 Leased
New Albany, IN 47130
901 East Highway 131 1981 Owned
Clarksville, IN 47130
701 Highlander Point Drive 1990 Owned
Floyds Knobs, IN 47119
102 Heritage Square 1992 Owned
Sellersburg, IN 47172
201 W. Court Ave. 1996 Owned
Jeffersonville, IN 4710
5112 Highway 62 1997 Owned
Jeffersonville, IN 47130
Community Bank of Kentucky:
106A West John Rowan Blvd. - Main Office 1997 Leased
Bardstown, KY 40004
119 East Stephen Foster Ave. 1972 Owned
Bardstown, KY 40004
ITEM 3. LEGAL PROCEEDINGS
There are various claims and law suits in which the Company or its subsidiaries
are periodically involved, such as claims to enforce liens, condemnation
proceedings on properties in which the Banks hold security interests, claims
involving the making and servicing of real property loans and other issues
incident to the Banks' business. In the opinion of management, no material loss
is expected from any of such pending claims or lawsuits.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the quarter ended December 31, 2001.
________________________________________________________________________________
10.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
See page 21 of the Annual Report to Stockholders incorporated herein as Exhibit
13, which is incorporated herein by reference to information under the heading
"Market and Dividend Information."
ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
See page 4 of the Annual Report to Stockholders incorporated herein as Exhibit
13, which is incorporated herein by reference to information under the headings
"Selected Consolidated Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See pages 5 - 21 of the Annual Report to Stockholders incorporated herein as
Exhibit 13, which are incorporated herein by reference to information under the
heading "Management's Discussion and Analysis."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See pages 19 - 21 of the Annual Report to Stockholders incorporated herein as
Exhibit 13, which are incorporated herein by reference to information under the
heading "Market Risk Analysis."
ITEM 8. FINANCIAL STATEMENTS
See pages 28 - 52 of the 2001 Annual Report to Stockholders incorporated herein
as Exhibit 13, which are incorporated herein by reference to information under
the headings "Consolidated Balance Sheets," "Consolidated Statements of Income,"
"Consolidated Statements of Changes in Stockholders' Equity," "Consolidated
Statements of Cash Flows," and "Notes to Consolidated Financial Statements."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 1, 2001, the board of directors of the Company determined to engage
Crowe, Chizek and Company LLP as its independent auditors for the fiscal year
ended December 31, 2001. On March 1, 2001, the registrant orally notified Monroe
Shine & Co., Inc. ("Monroe Shine"), its current independent auditors, of
this determination and that Monroe Shine would not be engaged for the fiscal
year ending December 31, 2001. The determination to replace Monroe Shine was
recommended by the audit committee and approved by the full board of directors
of the Company.
The report of Monroe Shine on the consolidated financial statements of the
Company for the years ended December 31, 2000 and 1999 contained no adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope, or accounting principles. During the years ended
December 31, 2000 and 1999 and during the period from December 31, 2000 to March
1, 2001, there were no disagreements between the registrant and Monroe Shine
concerning accounting principles or practices, financial statement disclosures,
or auditing scope or procedure.
________________________________________________________________________________
11.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
Information concerning Directors and executive officers of the Registrant and
reporting under Section 16 of the Securities Exchange Act of 1934 is
incorporated herein by reference to information under the headings "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive Proxy Statement for the Annual Meeting of Stockholders to
be held on May 21, 2002.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated herein by
reference to the information under the headings "Executive Compensation",
"Compensation of Directors", "Defined Benefit Pension Plan", "Employment and
Retirement Agreements", and "Compensation Committee Interlocks and Insider
Participation" in the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 21, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain owners and management is
incorporated herein by reference to the information under the heading "Stock
Ownership by Directors and Executive Officers" in the Company's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held on May 21, 2002.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning relationships and transactions is incorporated herein by
reference to the information under the headings "Compensation Committee
Interlocks and Insider Participation", "Indebtedness of Management", and "Other
Transactions with Management and Related Parties" in the Company's definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on May 21,
2002.
________________________________________________________________________________
12.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following information, appearing in the Registrant's Annual Report to
Stockholders for the year ended December 31, 2001, is incorporated by reference
in this Annual Report on Form 10-K as Exhibit 13.
Page in Annual
Annual Report Section Report
Selected Consolidated Financial Data 4
Management's Discussion and Analysis of Financial Condition and Results of Operations 5-21
Change in or Disagreements with Accountants 22
Independent Auditor's Report 26-27
Consolidated Balance Sheets 28
Consolidated Statements of Income 29
Consolidated Statements of Changes in Stockholders' Equity 30
Consolidated Statements of Cash Flows 31
Notes to Consolidated Financial 32-52
(a)(2) Financial Statement Schedules
All financial statement schedules have been omitted as the required information
is inapplicable or the required information has been included in the
Consolidated Financial Statements or notes thereto.
___________________________________________________________________________________________________________________________
13.
(a) (3) Exhibits
Exhibit
Number Document
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
4.0 Common Stock Certificate (1)
10.1 Employment Agreement with Dale L. Orem * (2)
10.2 Retirement Agreement with Robert E. Yates * (2)
10.3 Employment Agreement with James D. Rickard * (3)
10.4 Community Bank Shares of Indiana, Inc. 1997 Stock Incentive Plan * (4)
10.5 Community Bank Shares of Indiana, Inc. Dividend Reinvestment Plan * (5)
13.0 Annual Report to Security Holders
21.0 Subsidiaries of Registrant
23.0 Consent of Crowe, Chizek and Company LLP
23.0 Consent of Monroe Shine & Co., Inc.
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Report pursuant to Item 601 of Regulation S-K.
(1) Incorporated herein by reference to Registration Statement on Form S-1
filed December 9, 1994 (File No. 33-87228).
(2) Incorporated by reference to the Annual Report on Form 10-K filed April 2,
2001.
(3) Incorporated by reference to the Quarterly Report on Form 10-Q filed
November 14, 2000.
(4) Incorporated by reference from the exhibits filed with the Registration
Statement on Form S-8, and any amendments thereto, Registration statement
No. 333- 60089.
(5) Incorporated by reference from the exhibits filed with the Registration
statement on Form S-3, and any amendments thereto, Registration Statement
No. 333-40211.
(b) Reports on Form 8-K:
Filing date Event reported
03/06/2001 Change in Registrant's Certifying Accountant
from Monroe Shine & Co., Inc. to Crowe, Chizek
and Company LLP
03/21/2001 Increase in Quarterly Dividend to Common Stockholders
from $0.135 Per Share to $0.145 Per Share
04/16/2001 Announcement of First Quarter 2001 Financial Results
05/15/2001 $3.0 Million Common Share Repurchase Program
06/27/2001 Appointment of George M. Ballard of Bardstown,
Kentucky to the Board of Directors.
07/19/2001 Announcement of Second Quarter 2001 Financial Results
10/23/2001 Announcement of Third Quarter 2001 Financial Results
11/15/2001 Resignation of Senior Vice President
01/29/2002 Announcement of Fourth Quarter and Annual 2001
Financial Results
___________________________________________________________________________________
14.
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.
COMMUNITY BANK SHARES OF INDIANA, INC.
Date: March 30, 2002 By: \s\ James D. Rickard
--------------------
JAMES RICKARD
President, Chief Executive
Officer and Director
________________________________________________________________________________
15.
Pursuant to the requirements of the Securities Exchange of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
By: \s\ C. Thomas Young By: \s\ Timothy T. Shea
-------------------- -------------------
C. THOMAS YOUNG, TIMOTHY T. SHEA,
Chairman of the Board Vice Chairman of the Board
of Directors of Directors
Date: March 30, 2002 Date: March 30, 2002
By: \s\ Robert J. Koetter, Sr. By: \s\ Steven R. Stemler
-------------------------- ---------------------
ROBERT J. KOETTER, SR., STEVEN R. STEMLER,
Director Director
Date: March 30, 2002 Date: March 30, 2002
By: \s\ Gary L. Libs By: \s\ Dale L. Orem
------------------- ----------------
GARY L. LIBS, DALE L. OREM,
Director Director
Date: March 30, 2002 Date: March 30, 2002
By: \s\ James W. Robinson By: \s\ Paul A. Chrisco
--------------------- -------------------
JAMES W. ROBINSON, PAUL A. CHRISCO,
Director Senior Vice President,
Date: March 30, 2002 Chief Financial Officer
Date: March 30, 2002
By: \s\ George M. Ballard
---------------------
George M. Ballard,
Director
Date: March 30, 2002
By: \s\ Gordon L. Huncilman
---------------------
GORDON L. HUNCILMAN,
Director
Date: March 30, 2002
By: \s\ Kerry M. Stemler
---------------------
KERRY M. STEMLER,
Director
Date: March 30, 2002
By: \s\ James D. Rickard
--------------------
JAMES D. RICKARD,
President, Chief Executive
Officer, and Director
Date: March 30, 2002
________________________________________________________________________________
16.
Exhibit Index
Exhibit
Number Document
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
4.0 Common Stock Certificate (1)
10.1 Employment Agreement with Dale L. Orem * (2)
10.2 Retirement Agreement with Robert E. Yates * (2)
10.3 Employment Agreement with James D. Rickard * (3)
10.4 Community Bank Shares of Indiana, Inc. 1997 Stock Incentive Plan * (4)
10.5 Community Bank Shares of Indiana, Inc. Dividend Reinvestment Plan * (5)
13.0 Annual Report to Security Holders
21.0 Subsidiaries of Registrant
23.0 Consent of Crowe, Chizek and Company LLP
23.0 Consent of Monroe Shine & Co., Inc.
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Report pursuant to Item 601 of Regulation S-K.
(1) Incorporated herein by reference to Registration Statement on Form S-1
filed December 9, 1994 (File No. 33-87228).
(2) Incorporated by reference to the Annual Report on Form 10-K filed
April 2, 2001.
(3) Incorporated by reference to the Quarterly Report on Form 10-Q filed
November 14, 2000.
(4) Incorporated by reference from the exhibits filed with the
Registration Statement on Form S-8, and any amendments thereto,
Registration statement No. 333- 60089.
(5) Incorporated by reference from the exhibits filed with the
Registration statement on Form S-3, and any amendments thereto,
Registration Statement No. 333-40211.
___________________________________________________________________________________________