President's Message

Fellow Stockholders:

Unquestionably, we are in the midst of a challenging economic environment that has seen a government takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, and the acquisitions of Bear Stearns, Merrill Lynch, Wachovia Bank, and Washington Mutual by other financial behemoths. In the previous fiscal year we were challenged by the low interest rate spreads and an uncertain housing market. The latter also plagued the economy in the fiscal year ended June 30, 2008, and continues today. As Congress and the American people debate the merits of the recently enacted Emergency Economic Stabilization Act of 2008, there is a general consensus that the markets will stabilize from Wall Street to southern Indiana.

In addition to the financial uncertainty, our local economies have had to deal with flooding, wind storm damage, loss of crops, and employee layoffs. We are working with customers to keep them in their homes and businesses while maintaining our solid financial position. Our company was founded in 1904 and throughout our many years we’ve focused on preserving a strong capital base built on conservative banking practices. Furthermore, we are committed to maintaining prudent loan loss reserves during this uncertain economic time.

We have been focused on generating fee income and increasing our net interest margin while at the same time looking to add quality loans to our portfolio. Given the economy over the past year, I’m encouraged, but not satisfied, that our core earnings for fiscal 2008 were up 55% from fiscal 2007, even taking into consideration $670,000 of additional provisions in the fourth quarter for expected losses on two commercial loan relationships.

In my letter to you last year, I outlined several product initiatives aimed at increasing the Bank’s personal and business product lines, and providing additional fee income or reducing expenses. One year later, I am very pleased that these initiatives have been well received by our individual and commercial customers and have positively impacted the Bank. Four initiatives, in particular, stand out:

“Gonzo checking”, a high interest checking account driven by debit card usage. Of the $13.8 million in that account at June 30, 2008, 77% of the deposits were new money to the Bank.
Implementation of electronic statements or “e-statements”. At June 30, 2008, 1,650 accountholders or 16.9% of eligible accountholders had registered for “e-statements”. The cost of “e-statements” is less than 20% that of normal mailed statements.
“OOPS” our Occasional Overdraft Privilege Service. “OOPS” has increased fee income generated from checking account customers by 87% in the fiscal year ended June 30, 2008.
First Federal Investment Professionals. First Federal Investment Professionals has benefited the Bank by having investment options available to our customers in addition to those offered by the Bank. First Federal Investment Professionals has helped to develop new customers and revenues for the Bank.

During the past twelve months, the Company completed the process of de-registration from the Securities and Exchange Commission and delisting of our stock from trading on the NASDAQ exchange. It is our intention to continue to communicate to you, our shareholders, through press releases on earnings reports, dividend payments, stock repurchases and other significant events. Copies our audit report, financial statements and the items previously mentioned will be available on our website under the Investor Information link.

Management will remain receptive of ways to increase efficiencies and profitability within the Company 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