Indiana Community Bancorp Announces Second Quarter Earnings

COLUMBUS, Ind., July 22 /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 quarterly
earnings of $273,000 or $0.08 diluted earnings per common share, for the
quarter. This compared to earnings of $1,691,000 or $0.47 diluted earnings
per share, for the comparable quarter in 2007. Year-to-date net income was
$1,692,000 or $0.50 diluted earnings per common share, compared to $2,780,000,
or $0.77 diluted earnings per common share, a year earlier. The second
quarter was negatively impacted by an increase in the provision for loan
losses of approximately $1.5 million over planned levels and by the
recognition of an impairment charge related to the Bank's investment in the
AMF Ultra Short Mortgage Fund of $419,000. Total loans increased $25.1
million for the quarter and $27.9 million year-to-date driven by commercial
loan and commercial mortgage loan growth of $33.0 million for the quarter and
$47.2 million year-to-date. Chairman and CEO John Keach, Jr. stated, "The
decision to aggressively address credit issues was done to enhance the
Company's franchise value in the long term." Executive Vice President and CFO
Mark Gorski added, "Management of credit quality and expense reduction
initiatives will be our primary focus during the second half of 2008."
Balance Sheet
Total assets were $925.9 million as of June 30, 2008, an increase of $17.1
million from December 31, 2007. Total loans increased $25.1 million for the
quarter and $27.9 million year-to-date. The growth in the loan portfolio was
primarily the result of an increase in commercial loans of $5.6 million
year-to-date and an increase in commercial mortgage loans of $41.6 million
year-to-date. The increase in commercial loans has been partially offset by a
decrease in residential mortgage loans. Residential mortgage loans have
decreased $12.5 million year-to-date as substantially all new mortgage loan
originations are being sold in the secondary market.
Total retail deposits decreased $11.8 million year-to-date. During 2008,
public fund interest checking account balances decreased $11.6 million which
reflects a normal seasonal trend as many of the Bank's public entity customers
maintain larger balances at year end. Total retail deposits excluding public
fund checking were flat compared to December 31, 2007. Increases in demand
account balances of $12.2 million and certificates of deposit of $4.4 million
were offset by decreases in money market account balances of $24.4 million.
Total FHLB borrowings increased $27.4 million year-to-date. The increase
in FHLB borrowings was necessary to provide funding for loan growth and to
offset the decrease in retail deposits.
As of June 30, 2008, shareholders' equity was $67.4 million. The return
on average assets year-to-date was 0.37% annualized while the return on
average equity year-to-date was 4.96%.
Asset Quality
Provision for loan losses totaled $1.9 million for the quarter which
represents an increase of $1.7 million over the $233,000 provision recorded in
the second quarter of 2007. The $1.7 million increase in the provision for
loan losses resulted primarily from a $400,000 increase relating to
significant flooding which occurred during the second quarter in the Bank's
headquarters market of Columbus, Indiana, and a $1.1 million increase in the
provision resulting from unusually high net charge offs for the second
quarter. Charge offs for the second quarter were $1.3 million compared to
historic levels of $250,000-300,000 per quarter. Based on a review of areas
impacted by the flood, certain property securing Bank loans in the flooded
areas sustained significant damage. The $400,000 provision expense related to
the flood damage consisted of a $100,000 increase resulting from specific
charge offs for loans affected by the flood damage and an additional provision
expense of $300,000 recorded for inherent losses due to the decrease in the
value of residential real estate in areas impacted by the flood. The large
increase in charge offs during the second quarter resulted primarily from a
$600,000 write down of a $3.0 million residential land development loan that
had been classified as non-performing during 2007 and from charge offs related
to residential mortgage and residential investment real estate loans.
Non-performing assets to total assets increased to 1.45% at June 30, 2008 from
1.29% at December 31, 2007. Non-performing loans to total gross loans
increased to 1.66% at June 30, 2008 from 1.51% at December 31, 2007. The
ratio of the allowance for loan losses to total loans was 0.98% at June 30,
2008 compared to 0.92% at December 31, 2007.
Net Interest Income
Net interest income increased $304,000 or 4.4% to $7.2 million for the
second quarter while year-to-date net interest income increased $391,000 or
2.9% to $14.1 million. Net interest margin for the second quarter of 2008 was
3.38%, which represented an increase of 14 basis points compared to the first
quarter of 2008. Net interest margin had been 3.38% in the fourth quarter of
2007, but net interest margin for the first quarter of 2008 decreased to 3.24%
due to a significant decrease in short term interest rates. Net interest
margin rebounded to 3.38% in the second quarter of 2008 due primarily to
reduced funding costs for certificates of deposit and money market deposits.
Non Interest Income
Non interest income decreased $439,000 to $2.8 million for the second
quarter and decreased $262,000 to $5.9 million year-to-date. During the
second quarter, the Bank recognized an impairment charge of $419,000 related
to an investment in the AMF Ultra Short Mortgage Fund. During the second
quarter, the net asset value of the Fund declined significantly due to
liquidity concerns within the mortgage backed securities market combined with
the downgrade of certain securities in the Fund's portfolio by various ratings
agencies. The Bank redeemed its shares in the Fund for cash and securities
during the third quarter, resulting in an additional impairment charge of
$17,000 in that quarter. Excluding the impact of the impairment charge, non
interest income increased $157,000 or 2.6% year-to-date.
Gain on sale of loans increased $111,000 or 16.1% year-to-date due to
increased origination volumes particularly in Indianapolis. Investment
advisory services increased $67,000 or 7.6% year-to-date due to increased
assets under management.
Non Interest Expenses
Non interest expenses increased $451,000 or 6.2% to $7.8 million for the
second quarter while year-to-date non interest expenses increased $68,000 or
0.5% to $15.2 million. Excluding the impact of the one-time employee related
expense and the write-down of the Bank's former operations building incurred
in 2007, expenses increased $651,000 or 8.9% for the second quarter and $1.1
million or 7.0% year-to-date. Compensation and employee benefits expense
increased $186,000 or 4.6% for the second quarter and $337,000 or 4.1%
year-to-date due to additional salary and incentive compensation expense for
the new commercial lending, cash management and commercial credit staff in
Indianapolis, an increase in the Company match on the 401(k) and normal annual
salary increases partially offset by a decrease in expense related to the
defined benefit pension plan. The Company froze its defined benefit pension
plan effective April 1, 2008 which decreased expense by $102,000 in the second
quarter of 2008 compared to the first quarter. Marketing expense increased
$184,000 for the quarter and $333,000 year-to-date due to the timing of
advertising associated with the name change. The Company anticipates total
marketing cost for 2008 to approximate the average marketing expense over the
previous two years. Miscellaneous expenses associated with non-performing
assets and other real estate owned increased $155,000 for the second quarter
and $204,000 year-to-date due to increased costs associated with certain
properties.
Stock Repurchase Programs
In January 2008, the Board of Directors approved the thirteenth
repurchase, from time to time, on the open market of up to 5% of the Company's
outstanding shares of common stock, without par value ("Common Stock"), or
168,498 such shares. Such purchases will be made subject to market conditions
in open market or block transactions. Management believes that the purchase
of these shares will help increase long term shareholder value by increasing
earnings per share and return on equity. The Company repurchased 11,886
shares under this plan during the first quarter. There were no shares
repurchased during the second quarter.
Indiana Community Bancorp is a bank holding company registered with the
Board of Governors of the Federal Reserve System (the "Federal Reserve"),
which has been authorized by the Federal Reserve to engage in activities
permissible for a financial holding company. 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)
June 30, December 31,
2008 2007
------------ ------------
Assets:
Cash and cash equivalents $30,877 $40,552
Securities available for sale at fair value
(amortized cost $63,774 and $62,551) 63,277 62,306
Securities held to maturity at amortized cost
(fair value $1,544 and $1,558) 1,550 1,557
Loans held for sale (fair value $5,376 and
$7,250) 5,261 7,112
Portfolio loans:
Commercial loans 213,217 207,590
Commercial mortgage loans 310,622 269,035
Residential mortgage loans 130,024 142,481
Second and home equity loans 100,127 103,560
Other consumer loans 24,131 27,345
Unearned income (342) (165)
------------ ------------
Total portfolio loans 777,779 749,846
Allowance for loan losses (7,649) (6,972)
------------ ------------
Portfolio loans, net 770,130 742,874

Premises and equipment 15,368 15,599
Accrued interest receivable 3,996 4,670
Goodwill 1,875 1,875
Other assets 33,564 32,261
------------ ------------
TOTAL ASSETS $925,898 $ 908,806
============ ============

Liabilities and Shareholders' Equity:
Liabilities:
Deposits:
Demand $81,913 $69,728
Interest checking 94,618 103,624
Savings 42,490 37,513
Money market 161,410 185,803
Certificates of deposits 305,543 301,146
------------ ------------
Retail deposits 685,974 697,814
------------ ------------
Brokered deposits 9,184 9,174
Public fund certificates 2,662 563
------------ ------------
Wholesale deposits 11,846 9,737
------------ ------------
Total deposits 697,820 707,551
------------ ------------

FHLB borrowings 126,782 99,349
Short term borrowings - 20
Junior subordinated debt 15,464 15,464
Accrued taxes, interest and expense 2,637 2,981
Other liabilities 15,792 15,987
------------ ------------
Total liabilities 858,495 841,352
------------ ------------

Commitments and Contingencies

Shareholders' equity:
No par preferred stock; Authorized: 2,000,000
shares Issued and outstanding: None
No par common stock; Authorized: 15,000,000
shares Issued and outstanding: 3,358,079 and
3,369,965 20,346 20,305
Retained earnings, restricted 48,170 48,089
Accumulated other comprehensive loss, net (1,113) (940)
------------ ------------

Total shareholders' equity 67,403 67,454
------------ ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $925,898 $ 908,806
============ ============

INDIANA COMMUNITY BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
------ -------- -------- ------
Interest Income:
Short term investments $92 $322 $393 $755
Securities 675 665 1,359 1,309
Commercial loans 3,129 3,578 6,550 6,890
Commercial mortgage loans 4,453 4,042 8,954 7,922
Residential mortgage loans 2,251 2,679 4,601 5,392
Second and home equity loans 1,524 1,783 3,205 3,654
Other consumer loans 478 584 985 1,172
------- ------- ------- -------
Total interest income 12,602 13,653 26,047 27,094
------- ------- ------- -------

Interest Expense:
Checking and savings accounts 154 414 516 931
Money market accounts 545 1,373 1,622 2,686
Certificates of deposit 3,167 3,621 6,642 7,060
------- ------- ------- -------
Total interest on retail
deposits 3,866 5,408 8,780 10,677
------- ------- ------- -------

Brokered deposits 112 177 223 429
Public funds 24 5 47 12
------- ------- ------- -------
Total interest on wholesale
deposits 136 182 270 441
------- ------- ------- -------
Total interest on deposits 4,002 5,590 9,050 11,118
------- ------- ------- -------

FHLB borrowings 1,266 928 2,528 1,765
Other borrowings - 5 - 7
Junior subordinated debt 174 274 419 545
------- ------- ------- -------
Total interest expense 5,442 6,797 11,997 13,435
------- ------- ------- -------

Net interest income 7,160 6,856 14,050 13,659
Provision for loan losses 1,924 223 2,284 503
------- ------- ------- -------
Net interest income after
provision for loan losses 5,236 6,633 11,766 13,156
------- ------- ------- -------

Non Interest Income:
Gain on sale of loans 396 378 799 688
Loss on securities (419) - (419) -
Investment advisory services 481 448 952 885
Service fees on deposit
accounts 1,659 1,708 3,154 3,163
Loan servicing income, net of
impairment 149 153 274 296
Miscellaneous 511 529 1,101 1,091
------- ------- ------- -------
Total non interest income 2,777 3,216 5,861 6,123
------- ------- ------- -------

Non Interest Expenses:
Compensation and employee
benefits 4,196 4,010 8,465 8,128
Occupancy and equipment 1,012 1,006 2,068 1,984
Service bureau expense 485 400 941 791
Marketing 539 355 894 561
Miscellaneous 1,522 1,532 2,801 3,637
------- ------- ------- -------
Total non interest expenses 7,754 7,303 15,169 15,101
------- ------- ------- -------

Income before income taxes 259 2,546 2,458 4,178
Income tax provision/(benefit) (14) 855 766 1,398
------- ------- ------- -------
Net Income $273 $1,691 $1,692 $2,780
======= ======= ======= =======

Basic earnings per common
share $0.08 $0.48 $0.50 $0.79
Diluted earnings per common
share $0.08 $0.47 $0.50 $0.77

Basic weighted average number
of shares 3,358,079 3,497,378 3,361,271 3,540,372
Dilutive weighted average
number of shares 3,358,253 3,581,548 3,366,472 3,631,479
Dividends per share $0.200 $0.200 $0.400 $0.400

Supplemental Data: Three Months Ended Year to Date
(unaudited) June 30, June 30,
------------------ ------------
2008 2007 2008 2007
---- ---- ---- ----
Weighted average interest rate earned
on total interest-earning assets 5.95% 6.89% 6.13% 6.85%
Weighted average cost of total
interest-bearing liabilities 2.64% 3.52% 2.90% 3.51%
Interest rate spread during period 3.30% 3.37% 3.23% 3.34%

Net interest margin
(net interest income divided by
average interest-earning assets on
annualized basis) 3.38% 3.46% 3.31% 3.45%
Total interest income divided by
average total assets (on annualized
basis) 5.50% 6.29% 5.67% 6.24%
Total interest expense divided by
average total assets (on annualized
basis) 2.39% 3.14% 2.63% 3.12%
Net interest income divided by
average total assets (on annualized
basis) 3.12% 3.16% 3.06% 3.15%

Return on assets (net income divided
by average total assets on
annualized basis) 0.12% 0.78% 0.37% 0.64%
Return on equity (net income divided
by average total equity on
annualized basis) 1.60% 9.92% 4.96% 8.00%

June 30, December 31,
2008 2007
---- ----

Book value per share outstanding $20.07 $20.02

Nonperforming Assets:
Loans: Non-accrual $11,612 $10,516
Past due 90 days or more 172 64
Restructured 1,228 874
------------------------
Total nonperforming loans 13,012 11,454
Real estate owned, net 282 286
Other repossessed assets, net 97 25
------------------------
Total Nonperforming Assets $13,391 $11,765

Nonperforming assets divided by total
assets 1.45% 1.29%
Nonperforming loans divided by total
loans 1.66% 1.51%

Balance in Allowance for Loan Losses $7,649 $6,972

SOURCE Indiana Community Bancorp

John K. Keach, Jr., Chairman, Chief Executive Officer, +1-812-373-7816, or
Mark T. Gorski, Executive Vice President, Chief Financial Officer,
+1-812-373-7379, both of Indiana Community Bancorp