Indiana Community Bancorp Announces 2009 Results

Jan 26, 2010, 16:05 ET from Indiana Community Bancorp

COLUMBUS, Ind., Jan. 26 /PRNewswire-FirstCall/ -- Indiana Community Bancorp (the "Company") (Nasdaq: INCB), the holding company of Indiana Bank and Trust Company of Columbus, Indiana (the "Bank"), today announced a net loss for 2009 of $5.8 million or $(2.09) diluted loss per common share compared to net income of $5.0 million or $1.47 diluted earnings per common share for 2008.  During the fourth quarter of 2009, the Company had a net loss of $1.4 million or $(0.50) diluted loss per common share compared to net income of $1.5 million or $0.43 diluted earnings per common share during the fourth quarter of 2008.  The fourth quarter was negatively impacted by prepayment fees on FHLB advances which totaled $3.8 million.  This expense was partially offset by security gains of approximately $2.0 million.  Management estimates that as a result of the FHLB advance prepayment, the Company's net interest income will improve by approximately $2.0 million annually beginning in 2010 as compared to the annualized results from the fourth quarter of 2009.  This projected increase in net interest income is expected to result in a net interest margin of approximately 3.25% which would represent an increase of 38 basis points over the net interest margin in the fourth quarter of 2009.  Excluding the impact of the FHLB advance prepayment and the securities sale gains, the Company's net loss would have been reduced to approximately $364,000 or $(0.20) diluted loss per common share for the fourth quarter.  The major factor which negatively impacted the results for 2009 was the significant increase in the provision for loan losses.  The Company increased the balance in the allowance for loan losses throughout 2009 due to the challenging economic cycle.  Net charge offs for 2009 totaled $11.7 million compared to $2.7 million in 2008 and the provision expense for 2009 totaled $16.2 million compared to $4.3 million in 2008.  The provision for loan losses totaled $3.4 million for the fourth quarter which exceeded net charge offs for the quarter by $943,000.  Retail deposit growth remained strong for 2009 as retail deposits increased $15.7 million for the fourth quarter and $145.3 million for the year.  As of December 31, 2009, shareholders' equity was $84.9 million and the Company's tangible common equity to assets ratio was 6.32%.  Chairman and CEO John Keach, Jr. stated, "The banking industry faced numerous challenges during 2009.  In addition to meeting those challenges head on, we focused on implementing changes with an eye toward a brighter future.  Our efforts to reduce our core operating costs and to improve our net interest margin should translate to improvements in our bottom line."  Executive Vice President and CFO Mark Gorski added, "Capitalizing on market disruption to grow our core deposit base has allowed us to significantly reduce our overall funding cost which will generate increased net interest income in future periods."

Balance Sheet

Total assets were $1.0 billion as of December 31, 2009, an increase of $41.0 million from December 31, 2008.  Total loans decreased $22.6 million for the quarter and $63.0 million year-to-date.  Commercial and commercial mortgage loans decreased $16.7 million for the quarter and $28.2 million year-to-date.  The commercial loan portfolio has continued to decline due to the challenging credit market which has contributed to the decrease in new commercial loan originations.  Also contributing to the decrease in commercial loans during the quarter was the transfer of $9.6 million from loans to other real estate owned during the fourth quarter.  Residential mortgage and consumer loans decreased $5.9 million for the quarter and $34.9 million year-to-date.  Mortgage loan originations remain substantially higher than the prior year due to significant refinance activity resulting from low interest rates; however, the majority of the refinance activity occurred in the first half of 2009.  As substantially all new mortgage loans are being sold in the secondary market, residential mortgage balances continue to decline.  Decreases in the mortgage loan portfolio account for $2.9 million of the decrease in consumer loans for the quarter and $22.7 million of the decrease year-to-date.

Total retail deposits increased $15.7 million for the quarter and $145.3 million or 20.9% year-to-date.  This substantial growth in retail deposits during 2009 occurred in all categories as demand deposits increased $9.2 million, interest bearing transaction accounts increased $111.5 million and certificates of deposit increased $24.6 million.  The Bank has seen deposit growth from individual accounts, business accounts and public entity accounts across the entire market footprint.  Management believes that deposit growth reflects customer preference for insured bank deposits which provide safety of principal balance plus interest.  Additionally, management believes that the high level of deposit growth during the year was due in part to the banking market disruption that occurred in the Company's southeast Indiana footprint.

Total wholesale funding decreased $55.5 million for the quarter and $95.3 million year-to-date.  During the fourth quarter, the Company prepaid $55.3 million of FHLB advances with a weighted average rate of 4.5% to reduce interest expense and improve net interest margin in future periods as yields on investment alternatives were in most cases substantially less than the rates being paid for the advances.

Asset Quality

Provision for loan losses totaled $3.4 million for the quarter and $16.2 million year-to-date which represented significant increases over the comparable periods in 2008.  The provision expense for the year has covered net charge offs and significantly increased the allowance for loan losses.  Net charge offs were $2.5 million for the fourth quarter and included $2.2 million of commercial loan charge offs and $273,000 of consumer loan charge offs.  Year-to-date net charge offs totaled $11.7 million and included $9.9 million of commercial loan charge offs and $1.8 million of consumer loan charge offs.  Total non-performing assets increased $1.5 million for the fourth quarter and $6.7 million year-to-date to $34.4 million at December 31, 2009.  Non-performing assets to total assets increased to 3.41% at December 31, 2009 compared to 2.86% at December 31, 2008.  The ratio of the allowance for loan losses to total loans increased to 1.78% at December 31, 2009 compared to 1.07% at December 31, 2008.

Net Interest Income

Net interest income decreased $145,000 or 2.0% to $7.1 million for the fourth quarter and year-to-date net interest income decreased $1.3 million or 4.4% to $27.5 million.  Net interest margin for the fourth quarter was 2.87% which was consistent with the previous two quarters.  Year-to-date net interest margin was 2.93% for 2009 compared to 3.35% for 2008.  The decrease in net interest margin for the year was primarily the result of an unusually high balance in interest earning demand deposits and an increase in non-accrual loans.  Due to continued increases in deposits and reduced loan demand, the excess liquidity was invested in short term securities throughout the year.  During the fourth quarter, the Company prepaid $55.3 million of FHLB advances with a weighted average rate of 4.5%.  This transaction should significantly reduce the Company's interest expense in future periods which will translate to expected improvement in net interest income.  Additionally, during January 2010, the Company restructured the remaining balance of FHLB advances thereby reducing the interest expense on the remaining portfolio of $55 million from 3.0% to approximately 1.9% based on current interest rates.

Non Interest Income

Non interest income increased $1.9 million for the fourth quarter and $738,000 year-to-date, however, included in non interest income for the fourth quarter was $1.9 million in net gain on sale of securities.  Excluding the net gain on sale of securities, non interest income would have been flat for the fourth quarter.  Gain on sale of mortgage loans continues to exceed prior year levels due to increased origination volumes however the quarterly gap continues to narrow.  For the quarter, gain on sale of mortgage loans was up $142,000 while the year-to-date total has increased $1.2 million.  The Bank discontinued offering brokerage services in September 2008.  Brokerage fee income totaled $1.4 million year-to-date in 2008.  Service fees on deposits have run consistently below prior year levels due primarily to a reduction in overdraft fees.  Service fees on deposits were down $115,000 or 6.6% for the quarter and down $444,000 or 6.5% year-to-date.  Miscellaneous income included a write-down on other real estate owned of $468,000 related to a former subdivision loan.  

Non Interest Expenses

Non interest expenses increased $4.1 million to $10.7 million for the fourth quarter and $4.6 million to $33.4 million year-to-date, however, included in non interest expenses for the fourth quarter was $3.8 million in FHLB prepayment fees.  Compensation and employee benefits expense increased $205,000 or 6.0% for the fourth quarter and decreased $1.6 million or 10.0% year-to-date.  Four primary factors contributed to the year-to-date decrease in compensation and benefits:  1) the Company froze its defined benefit pension plan effective April 1, 2008 resulting in an expense reduction of $354,000 for the year, 2) the Company reduced its workforce by approximately 10% in the third quarter of 2008 resulting in an expense reduction of approximately $600,000 for the year, 3) the Company discontinued offering brokerage services effective September 2008 resulting in an expense reduction of $809,000 for the year and 4) bonus and vacation related benefits have decreased resulting in an expense reduction of $387,000 for the year.  These decreases to compensation and employee benefits were partially offset by an increase in mortgage commissions of $577,000 as a result of increased mortgage volumes discussed above.  FDIC insurance increased $178,000 for the fourth quarter and $1.5 million year-to-date.  The year-to-date increase includes a special assessment of $454,000.  Marketing expense decreased $464,000 year-to-date due to the timing of advertising associated with the name change which occurred in the first and second quarters of 2008.  

Indiana Community Bancorp is a bank holding company registered with the Board of Governors of the Federal Reserve System.  Indiana Bank and Trust Company, its principal subsidiary, is an FDIC insured state chartered commercial bank.  Indiana Bank and Trust Company was founded in 1908 and offers a wide range of consumer and commercial financial services through 20 branch offices in central and southeastern Indiana.

Forward-Looking Statement

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include expressions such as "expects," "intends," "believes," and "should," which are necessarily statements of belief as to the expected outcomes of future events.  Actual results could materially differ from those presented.  Indiana Community Bancorp undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release. The Company's ability to predict future results involves a number of risks and uncertainties, some of which have been set forth in the Company's most recent annual report on Form 10-K, which disclosures are incorporated by reference herein.

INDIANA COMMUNITY BANCORP

CONSOLIDATED BALANCE SHEETS    

(in thousands, except share data)

(unaudited)

December 31,

December 31,

2009

2008

Assets:                      

  Cash and due from banks

$

10,808 

$

22,352 

  Interest bearing demand deposits

41,253 

234 

Cash and cash equivalents

52,061 

22,586 

Securities available for sale at fair value (amortized cost $149,031 and $90,957)

149,633 

91,096 

Securities held to maturity at amortized cost (fair value $3,802 and $3,884)

4,084 

4,467 

Loans held for sale (fair value $6,213 and $2,907)

6,075 

2,856 

Portfolio loans:

  Commercial and commercial mortgage loans

527,946 

556,133 

  Residential mortgage loans

97,551 

120,227 

  Second and home equity loans

97,071 

104,084 

  Other consumer loans

15,312 

20,532 

  Unearned income

(99)

(241)

Total portfolio loans

737,781 

800,735 

Allowance for loan losses

(13,113)

(8,589)

Portfolio loans, net

724,668 

792,146 

Premises and equipment

15,151 

15,323 

Accrued interest receivable

3,533 

3,777 

Goodwill

1,394 

Other assets

55,118 

35,728 

  TOTAL ASSETS                  

$

1,010,323 

$

969,373 

Liabilities and Shareholders' Equity:

Liabilities:

Deposits:

  Demand

$

80,938 

$

71,726 

  Interest checking

170,226 

110,944 

  Savings

42,520 

40,862 

  Money market

207,089 

156,500 

  Certificates of deposits

339,025 

314,425 

Retail deposits

839,798 

694,457 

  Brokered deposits

5,420 

  Public fund certificates

507 

10,762 

Wholesale deposits

507 

16,182 

Total deposits

840,305 

710,639 

FHLB advances

55,000 

129,926 

Short term borrowings

4,713 

Junior subordinated debt

15,464 

15,464 

Other liabilities

14,630 

16,619 

  Total liabilities

925,399 

877,361 

Commitments and Contingencies

Shareholders' equity:

No par preferred stock; Authorized:  2,000,000 shares

 Issued and outstanding:   21,500 and 21,500; Liquidation preference $1,000 per share

21,054 

20,962 

No par common stock; Authorized: 15,000,000 shares

 Issued and outstanding: 3,358,079 and 3,358,079

21,060 

20,985 

Retained earnings, restricted

42,862 

50,670 

Accumulated other comprehensive loss, net

(52)

(605)

  Total shareholders' equity

84,924 

92,012 

  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,010,323 

$

969,373 

INDIANA COMMUNITY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share data)

(unaudited)

           Three Months Ended

         December 31,

                 Year to Date

                 December 31,

         2009

        2008

   2009

       2008

Interest Income:

Short term investments

$

23 

$

12 

$

99 

$

462 

Securities

1,340 

815 

4,164 

2,878 

Commercial and commercial mortgage loans

7,520 

7,883 

30,192 

31,406 

Residential mortgage loans

1,322 

1,897 

6,192 

8,516 

Second and home equity loans

1,236 

1,454 

4,992 

6,186 

Other consumer loans

335 

437 

1,452 

1,890 

Total interest income

11,776 

12,498 

47,091 

51,338 

Interest Expense:

Checking and savings accounts

573 

308 

1,679 

981 

Money market accounts

538 

611 

2,235 

2,867 

Certificates of deposit

2,543 

2,760 

10,733 

12,265 

Total interest on retail deposits

3,654 

3,679 

14,647 

16,113 

Brokered deposits

91 

139 

426 

Public funds

76 

77 

185 

Total interest on wholesale deposits

167 

216 

611 

Total interest on deposits

3,657 

3,846 

14,863 

16,724 

FHLB borrowings

941 

1,234 

4,278 

5,059 

Other borrowings

Junior subordinated debt

76 

171 

411 

765 

Total interest expense

4,674 

5,251 

19,553 

22,549 

Net interest income

7,102 

7,247 

27,538 

28,789 

Provision for loan losses

3,433 

1,021 

16,218 

4,292 

Net interest income after

    provision for loan losses

3,669 

6,226 

11,320 

24,497 

Non Interest Income:

Gain on sale of loans

430 

288 

2,630 

1,446 

Gain/(loss) on sale of securities

1,862 

1,825 

(437)

Investment advisory services

1,371 

Service fees on deposit accounts

1,625 

1,740 

6,347 

6,791 

Loan servicing income, net of impairment

135 

138 

530 

551 

Miscellaneous

532 

528 

1,346 

2,218 

Total non interest income

4,584 

2,694 

12,678 

11,940 

Non Interest Expenses:

Compensation and employee benefits

3,616 

3,411 

14,257 

15,843 

Occupancy and equipment

936 

1,012 

3,854 

4,159 

Service bureau expense

434 

483 

1,891 

1,917 

FDIC premium

392 

214 

1,785 

286 

Marketing

192 

180 

777 

1,241 

Goodwill impairment

1,394 

FHLB advances prepayment fee

3,813 

3,813 

Miscellaneous

1,321 

1,287 

5,632 

5,388 

Total non interest expenses

10,704 

6,587 

33,403 

28,834 

Income (loss) before income taxes

(2,451)

2,333 

(9,405)

7,603 

Income tax provision (credit)

(1,082)

824 

(3,556)

2,600 

Net Income (Loss)

$

(1,369)

$

1,509 

$

(5,849)

$

5,003 

Basic earnings (loss) per common share

$

(0.50)

$

0.43 

$

(2.09)

$

1.47 

Diluted earnings (loss) per common share

$

(0.50)

$

0.43 

$

(2.09)

$

1.47 

Basic weighted average number of common shares

3,358,079 

3,358,079 

3,358,079 

3,359,666 

Dilutive weighted average number of common shares

3,358,079 

3,358,079 

3,358,079 

3,365,131 

Dividends per common share

$

0.010 

$

0.120 

$

0.260 

$

0.640 

Supplemental Data:

          Three Months Ended

     Year to Date

(unaudited)

           December 31,

     December 31,

2009

2008

2009

2008

Weighted average interest rate earned

   on total interest-earning assets

4.76%

5.62%

5.00%

5.97%

Weighted average cost of total

   interest-bearing liabilities

1.93%

2.42%

2.14%

2.68%

Interest rate spread during period

2.82%

3.21%

2.86%

3.29%

Net interest margin

   (net interest income divided by average

   interest-earning assets on annualized basis)

2.87%

3.26%

2.93%

3.35%

Total interest income divided by average

   Total assets (on annualized basis)

4.43%

5.19%

4.61%

5.51%

Total interest expense divided by

   average total assets (on annualized basis)

1.76%

2.18%

1.91%

2.42%

Net interest income divided by average

   total assets (on annualized basis)

2.67%

3.01%

2.70%

3.09%

Return on assets (net income divided by

   average total assets on annualized basis)

-0.51%

0.63%

-0.57%

0.54%

Return on equity (net income divided by

   average total equity on annualized basis)

-6.22%

7.99%

-6.48%

7.11%

December 31,

December 31,

2009

2008

Book value per share outstanding

$           18.86

$              20.98

Nonperforming Assets:

Loans: Non-accrual

$         19,889

$            22,534

        Past due 90 days or more

1,410

518

        Restructured

500

1,282

Total nonperforming loans

21,799

24,334

Real estate owned, net

12,603

3,335

Other repossessed assets, net

23

44

Total Nonperforming Assets

$         34,425

$            27,713

Nonperforming assets divided by total assets

3.41%

2.86%

Nonperforming loans divided by total loans

2.95%

3.03%

Balance in Allowance for Loan Losses

$         13,113

$             8,589

SOURCE Indiana Community Bancorp



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