President's Message

Fellow Stockholders:

The challenges that have gripped our economy for the last year seem to be loosening only marginally if at all. It seems that every Friday another bank is being closed somewhere in the country. Southern Indiana has not escaped the loss of jobs, property devaluation or companies closing. Although many economists see “green shoots” in various market segments as a reflection of the easing of the recession, most experts believe the recovery will be slow in formulating.

In response to the economic uncertainty caused by the collapse of the financial markets, the United States Congress is proposing various new agencies and laws in an effort to strengthen the financial climate and calm the public’s fears. For many years the Federal Deposit Insurance Corporation (FDIC), which is a government agency funded by financial institution premiums, insured depositors against loss, up to $100,000, in the event a financial institution would fail. This past year Congress authorized the increase in deposit protection provided by the FDIC to $250,000.

So far this year 95 banks have failed, severely reducing the FDIC’s insurance reserves. During fiscal 2009, the FDIC developed a multi-pronged approach to rebuild the Deposit Insurance Fund. First, it substantially raised our quarterly premiums and second, effective June 30, 2009, imposed a special assessment on banks covered by the fund. First Federal expensed $484,000 of FDIC premiums in fiscal 2009 compared to $28,000 in fiscal 2008. It now appears that the FDIC will require banks to prepay up to three years of premiums as a means to replenish its reserves. Other options still available to the FDIC include imposing another special assessment on banks and/or utilizing a line of credit from the Treasury Department that was approved by Congress.

The economic conditions during fiscal 2009 contributed to a deterioration of both personal and commercial credit quality in the banking industry, including southwestern Indiana. We have been working tirelessly with our distressed customers to achieve optimal resolutions. In addition, the Bank is committed to maintaining prudent loan loss reserves during this uncertain economic climate. To this end, the Bank recognized $1.8 million of provisions for loan losses in fiscal 2009, a $710,000 increase from the preceding fiscal year.

Over the past several years, the Bank has added new products to its personal and business lines in an effort to better meet the needs of its customers and increase efficiency in the operation of the Bank. These product enhancements are working and contributing to improved earnings as evidenced by net income of $1,355,000 for the twelve months ended June 30, 2009, a 68.5% increase over fiscal 2008. Consequently, earnings per share of $0.79 in fiscal 2009 compared favorably to the $0.45 achieved in fiscal 2008. While earnings for fiscal 2009 were not outstanding, they were solid considering the economic climate, the negative impact of the increased FDIC charges, and the increase in the provisions for loan losses.

For the year ended June 30, 2009, the Company increased its net interest rate margin to 2.88%, a 21 percent increase from fiscal 2008. At fiscal year end, the Bank’s tangible and core capital was 8.40% as compared to 7.60% at June 30, 2008, and the Bank’s risk-based capital was 12.79% at fiscal year end 2009 compared to 11.99% at fiscal year end 2008. These capital ratios comfortably exceeded all minimum regulatory requirements and qualified First Federal Savings Bank as “well-capitalized” under regulatory guidelines.

Management will remain focused on investigating ways to improve corporate efficiencies and profitability during these uncertain economic times while at the same time providing the services our individual and commercial customers need. I thank you for your investment in First Bancorp of Indiana, Inc.

Michael H. Head
President, CEO
First Bancorp. of Indiana, Inc.

President's Message

Bank Officers

Board of Directors