10-K405 1 iub-10k.txt SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2001 Commission file number 0-12422 INDIANA UNITED BANCORP (Exact name of registrant as specified in its charter) Indiana 35-1562245 (State or other jurisdiction (I.R.S. Employer of 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. [ ] 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 $127,303,646 as of March 20, 2002. As of March 20, 2002, there were outstanding 6,495,084 common shares, without par value, of the registrant. DOCUMENTS INCORPORATED BY REFERENCE Part of Form 10-K Documents Into Which Incorporated --------- ----------------------- 2001 Annual Report to Shareholders Part II (Items 5 through 8) Definitive Proxy Statement for Annual Part III (Items 10 through 13) Meeting of Shareholders to be held April 24, 2002 EXHIBIT INDEX: Page 9 FORM 10-K TABLE OF CONTENTS -------------------------------------------------------------------------------- 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 Related 9 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 10 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 and See below 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 (which effective January 31, 2001 was converted to an Indiana commercial bank). 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 89,207 shares of its common stock to The Anderson Group shareholders, valued at $1,364. Assets totaled $2,180 (including cash of $250) and liabilities assumed of $780. Assets acquired include goodwill of $1,628. 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 is now conducted through The Insurance Group subsidiary. In February 2000, the Company formed a subsidiary of the holding company called IUB Reinsurance Company, Ltd. This subsidiary is incorporated in Turks and Caicos and is a credit life insurance company. On May 1, 2000 the Company consummated its acquisition of First Affiliated Bancorp of Watseka, Illinois and its wholly owned banking subsidiary, Capstone Bank, N. A. The transaction was accounted for using the pooling-of-interests method of accounting. The Company issued 1,122,741 shares of its common stock to the shareholders of First Affiliated Bancorp (adjusted for stock dividends). This includes shares issued to redeem First Affiliated Bancorp stock options. The conversion rate was 4.4167 shares of Company stock for each outstanding share of First Affiliated at the effective date of the merger. Merger and related costs were charged against net income during 2000. The financial information contained herein includes First Affiliated Bancorp for all periods presented. In September 2000, the company purchased two branches in Marion County. These two facilities were integrated into Union Bank and resulted in the purchase of over $40,000 in deposits. 3 Also in September 2000, the Company formed two investment subsidiaries, People's Investment Company, Ltd. and Union Investment Company, Ltd. Incorporated in Bermuda, these subsidiaries hold a large portion of both Union Bank's and People's Trust's investment portfolios. In April 2001, the Company consummated its acquisition of the insurance agencies of Vollmer & Associates, Inc. ("Vollmer"). The transaction was accounted for using the purchase method of accounting. The purchase price consisted of $635 in cash and 24,184 shares of Company stock. The acquisition resulted in goodwill of approximately $1,000. The results of operations have been included since the acquisition date. The Vollmer agencies were subsequently merged into The Insurance Group. The Company operates 47 offices in Indiana and Illinois. As of December 31, 2001, the Company had consolidated assets of $1,178,392, consolidated deposits of $1,014,687 and shareholders' equity of $87,872. 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. 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 2000 all affiliates originated for the secondary market as well as continued to grow their internal portfolios. At December 31, 2001, the Company was servicing a $293,640 portfolio, which increased from $201,056 and $181,150 at year-end 2000 and 1999. 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. The principal source of revenues for the Company is interest and fees on loans, which accounted for 69.6% of total revenues in 2001, 70.2% in 2000 and 67.9% in 1999. 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 97.0% 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 16.1% of total revenues in 2001, 18.5% in 2000 and 21.1% in 1999. As of December 31, 2001, 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 depositors, the Banks market various programs for demand, savings and 4 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 competitor. 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. 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 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, 2001, the Company and its subsidiaries had approximately 452 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. 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. 5 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. 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, People's Trust, and Regional Bank are supervised, regulated and examined by the Indiana Department of Financial Institutions ("DFI") and the Federal Deposit Insurance Corporation ("FDIC"). Capstone Bank is supervised, regulated and examined by the Office of the Comptroller of the Currency ("OCC"). 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 all four banking subsidiaries are insured by the Bank Insurance Fund ("BIF") of the FDIC. The FDIC has the authority to change premiums twice per year. Branching by banks in Indiana is subject to the jurisdiction, and requires the prior approval, of the 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. 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 6 rate risk at individual banks. Banks may use an internal model that provides a measure of the change in a bank's economic value. 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 helped pay for the Financing Corp. ("FICO") bond interest payments at an assessment rate that was one-fifth the rate paid by thrifts. Beginning January 1, 2000, the FICO interest payments were 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 adopted procedures 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 file elections to become financial holding companies at any time. IUB has chosen not to become a financial holding company and remains a bank holding company. 7 CAPITAL REQUIREMENTS The Company and its subsidiary Banks must meet certain minimum capital requirements mandated by the FRB, FDIC 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 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, 2001, the Company's leverage ratio of capital to total assets was 7.4%. The FRB 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 11.4% and its Total Capital to Risk-Weighted Assets Ratio was 12.6% at December 31, 2001. The Company's Banks had capital to asset ratios and risk-adjusted capital ratios at December 31, 2001, 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. 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) VOLUME/RATE ANALYSIS OF CHANGES IN NET INTEREST INCOME The table on page 8a 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 2001 over 2000 and 2000 over 1999. AVERAGE DEPOSITS The table on page 8b discloses the average deposits for the Company for 2001, 2000 and 1999 and the maturity schedule of the over $100 certificates of deposit at December 31,2001. MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES OF COMMERCIAL AND CONSTRUCTION LOANS AT DECEMBER 31, 2001 Maturities and sensitivity to changes in interest rates of commercial and construction loans at December 31, 2001 are disclosed in the table on page 8c. ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES The table on page 8d discloses the allocation of the allowance for loan losses to the major loan categories. 8 Volume/Rate Analysis of Changes in Net Interest Income (Tax Equivalent Basis)
------------------------------------------------------------------------------------------------ ---------------------------------- 2001 OVER 2000 2000 OVER 1999 ------------------------------------------------------------------------------------------------ ---------------------------------- Volume Rate Total Volume Rate Total ------------------------------------------------------------------------------------------------ ---------------------------------- Interest income Loans 2,449 (2,713) $ (264) $ 9,625 $ 1,906 $ 11,531 Securities (1,755) 90 (1,665) (178) (117) (295) Federal funds sold and money market funds 1,409 (355) 1,054 (687) 445 (242) Short-term investments 3 3 6 (2) (44) (46) ------------------------------------------------------------------------------------------------ ---------------------------------- Total interest income 2,106 (2,975) (869) 8,758 2,190 10,948 ------------------------------------------------------------------------------------------------ ---------------------------------- Interest expense Interest-bearing DDA, savings, and money market accounts $ 845 $ (3,573) (2,728) $ 328 $ 1,602 $ 1,930 Certificates of deposit $ 278 $ (599) (321) 3,203 2,075 5,278 Borrowings (362) (621) (983) 870 318 1,188 Trust preferred securities -- -- -- -- -- -- ------------------------------------------------------------------------------------------------ ---------------------------------- Total interest expense 761 (4,793) (4,032) 4,401 3,995 8,396 ------------------------------------------------------------------------------------------------ ---------------------------------- Change in net interest income $ 1,345 $ 1,818 3,163 $ 4,357 $ (1,805) 2,552 -------------------- --------------------- Change in tax equivalent adjustment 484 (720) ------------------------------------------------------------------------------------------------ ---------------------------------- Change in net interest income before tax equivalent adjustment $ 2,679 $ 3,272 ------------------------------------------------------------------------------------------------ ----------------------------------
8a Average Deposits
------------------------------------------------ ------------------------- ------------------------- 2001 2000 1999 ------------------------------------------------ ------------------------- ------------------------- Amount Rate Amount Rate Amount Rate ------------------------------------------------ ------------------------- ------------------------- Demand $ 85,317 $ 93,987 $ 88,752 Interest Bearing Demand 182,557 1.55% 216,303 3.52% 231,633 2.77% Savings 218,792 2.69 146,102 2.64 112,839 2.76 Certificates of Deposit 545,458 5.45 540,353 5.56 482,500 5.13 ------------------------------------ ------------ ------------- Totals $1,032,124 3.72% $ 996,745 4.16% $ 915,724 3.74% ========== ========== ==========
As of December 31, 2000, 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 $26,470 $26,209 $21,226 $13,575 $87,480 Percent 30% 30% 24% 16% 8b Maturities and Sensitivity to Changes in Interest Rates of Commercial and Construction Loans at December 31, 2000
---------------------------------------------------------------------------------------------------------------------- Due: Within 1 Year 1 - 5 Years Over 5 years Total ---------------------------------------------------------------------------------------------------------------------- Loan Type Commercial and industrial $ 34,408 $ 36,036 $ 11,364 81,808 Agricultural production financing and other loans to farmers 12,826 6,524 1,376 20,726 Construction and development 27,175 2,887 4,068 34,130 ---------------------------------------------------------------------------------------------------------------------- Totals $ 74,409 $ 45,447 $ 16,808 $136,664 ---------------------------------------------------------------------------------------------------------------------- Percent 54% 33% 12% 100% ---------------------------------------------------------------------------------------------------------------------- Rate Sensitivity Fixed Rate $ 18,374 $ 15,363 $ 11,204 $ 44,941 Variable Rate 85,072 6,651 -- 91,723 ---------------------------------------------------------------------------------------------------------------------- Totals $103,446 $ 22,014 $ 11,204 $136,664 ----------------------------------------------------------------------------------------------------------------------
8c Allocation of the Allowance for Loan Losses
------------------------------------------- ----------------- ----------------- ----------------- ----------------- 2001 2000 1999 1998 1997 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 $2,159 43% $1,076 47% $ 598 46% $ 445 45% $ 331 44% Farm real estate 301 6 442 6 397 6 325 7 20 8 Commercial 2,453 20 1,004 16 829 15 765 18 327 18 Construction and development 858 7 909 6 965 7 830 6 66 3 ------------------------------------------------------------- ---------------- ----------------- ----------------- Total real estate 5,771 75 3,431 75 2,789 74 2,365 76 744 73 ------------------------------------------------------------- ---------------- ----------------- ----------------- Commercial Agribusiness 368 3 965 3 1,011 3 962 3 407 3 Other commercial 1,349 11 1,204 12 812 11 516 8 591 9 ------------------------------------------------------------- ---------------- ----------------- ----------------- Total Commercial 1,717 14 2,169 15 1,823 14 1,478 11 998 13 ------------------------------------------------------------- ---------------- ----------------- ----------------- Consumer 952 11 1,349 10 1,413 12 1,155 13 611 14 Unallocated 554 1,767 1,693 1,602 3,619 ------------------------------------------------------------- ---------------- ----------------- ----------------- Total $8,994 100% $8,716 100% $7,718 100% $6,600 100% $5,972 100% ------------------------------------------------------------- ---------------- ----------------- -----------------
8d INVESTMENT SECURITIES The composition and maturity of the investment portfolio is depicted in the table on page 8e. ITEM 2. PROPERTIES ------------------- (Dollars in Thousands) Indiana United Bancorp owns no physical properties. In February 2002, the Company entered into a five-year lease of 28,000 square feet of space to be used as an operations center in Greensburg, Indiana. Its subsidiaries own, or lease, all of the facilities from which they conduct business. The Company has 47 locations of which People's Trust has 20, Union Bank has 16, Regional Bank has 6, and Capstone has 5. At December 31, 2001, the Company had $16,840 invested in premises and equipment. ITEM 3. LEGAL PROCEEDINGS -------------------------- 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 ------------------------------------------------------------ No matters were submitted during the fourth quarter of 2001 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 -------------------------------------------------------------------------- The information required under this item is incorporated by reference to the information provided in the "Shareholder Information" section on the inside back cover page of the Company's Annual Report to Shareholders filed with this report as Exhibit 13. ITEM 6. SELECTED FINANCIAL DATA -------------------------------- The information required under this item is incorporated by reference to the information provided on page 11 of the Company's Annual Report to Shareholders filed with this report as Exhibit 13. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------------------------------ The information required under this item is incorporated by reference to the information provided on pages 10 through 21 of the Company's Annual Report to Shareholders filed with this report as Exhibit 13. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. -------------------------------------------------------------------- The information required under this item is incorporated by reference to the information provided on pages 19 and 20 of the Company's Annual Report to Shareholders filed with this report as Exhibit 13. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. --------------------------------------------------- The financial statements and supplementary data required under this item are incorporated herein by reference to the information provided on pages 22 through 39 of the Company's Annual Report to Shareholders filed with this report as Exhibit 13. 9 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. ------------------------------------------------------------- In connection with its audits for the three most recent fiscal years ended December 31, 2001, there have been no disagreements with the Company's independent certified public accountants on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure. 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 22 Consolidated balance sheets at December 31, 2001 and 2000 23 Consolidated statements of income, years ended December 24 31, 2001, 2000 and 1999. Consolidated statements of shareholders' equity, years 25 ended December 31, 2001, 2000 and 1999 Consolidated statements of cash flows, years ended 26 December 31, 2001, 2000 and 1999 Notes to consolidated financial statements 27-39 (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: 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 amended by Articles of Amendment to Articles of Incorporation effective August 6, 1998 (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K 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 April 28, 1998 (incorporated by reference to Exhibit 3.2 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)). 10 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 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)). 10.1 Form of Employment Agreement between the Registrant and James L. Saner, Sr. (incorporated by reference to Annex A to the Proxy Statement/Prospectus that is part of the Registration Statement on Form S-4 filed March 18, 1998 with the Commission (Registration No. 333-48057)). 10.2 Form of Executive Severance Agreement dated January 16, 2001 between the Registrant and James L. Saner, Sr. (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K of the registrant for the fiscal year ended December 31,2000 filed March 30, 2001 with the Commission (Commission File No. 0-12422)). 10.3 Form of Executive Severance Agreement dated January 16, 2001 between the Registrant and the following Named Executive Officers: Michael K. Bauer, Donald A. Benziger and Daryl R. Tressler (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K of the registrant for the fiscal year ended December 31,2000 filed March 30, 2001 with the Commission (Commission File No. 0-12422)). 13 2001 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). 21 List of subsidiaries of the Registrant. 23.1 Consent of Crowe, Chizek and Company LLP (b) Reports on Form 8-K None 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 25th day of March, 2002. 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 --------- -------- ---- /s/ Eric E. Anderson -------------------------------- Eric E. Anderson Director March 18, 2002 /s/ William G. Barron -------------------------------- William G. Barron Director March 18, 2002 /s/ Dale J. Deffner -------------------------------- Dale J. Deffner Director March 18, 2002 /s/ Don Dunevant -------------------------------- Don Dunevant Director March 18, 2002 /s/ Philip A. Frantz -------------------------------- Philip A. Frantz Director March 18, 2002 /s/ Rick S. Hartman -------------------------------- Rick S. Hartman Director March 18, 2002 /s/ Robert E. Hoptry -------------------------------- Robert E. Hoptry Director March 18, 2002 Chairman of the Board /s/ Edward J. Zoeller -------------------------------- Edward J. Zoeller Director March 18, 2002 /s/ James M. Anderson -------------------------------- James M. Anderson Controller & March 18, 2002 Principal Accounting Officer /s/ Donald A. Benziger -------------------------------- Donald A. Benziger Senior Vice March 18, 2002 President & Chief Financial Officer /s/ James L. Saner, Sr. -------------------------------- James L. Saner, Sr. Director March 18, 2002 President & Chief Executive Officer