President's Message

There is no doubt that the fiscal year ended June 30, 2007 was a challenging time to be in the banking business. The yield curve kept interest rate spreads low, uncertainty about the housing market depressed mortgage loan activity as well as other consumer borrowing, and, ultimately, concerns about the subprime mortgage market led to a liquidity crisis in some segments of the mortgage market. Despite this difficult environment, I am excited about the progress we made in the past year and our prospects for the future.

During the past twelve months, the Company completed the integration of Home Building Savings Bank. Operating as a division of First Federal, Home Building Savings Bank has full-service branches and ATMs located in Washington and Petersburg, Indiana. Along with these additional facilities, the acquisition brought us some terrific staff and helped us broaden our leadership with Greg Haag, former Chairman of Home Building Savings Bank Board, joining the Company’s Board.

After careful study, we decided to close the Division Street Branch Office effective last January. With the existing branch network in Evansville, we determined that we could recognize meaningful cost efficiencies without sacrificing customer service. The property has since been sold. Currently, the Company has nine branch office locations – five in Vanderburgh County and one in Posey (St. Philip), Warrick (Belle Oaks Shopping Center-Newburgh), Pike (Petersburg) and Daviess (Washington) counties.

The Commercial Lending and Business Development departments of the Bank had a good year. The commercial real estate mortgage portfolio increased 48% to $48.1 million on production of $22.5 million. The commercial loan portfolio grew 91% to $17.5 million on production of $16.9 million.

The Commercial Business Development officers had a very successful year establishing new relationships with small businesses, churches, and not-for-profit organizations in our market area and strengthening relationships with existing business customers of the Bank. The Bank has developed a full array of business checking accounts, on-line business banking tools, cash management and deposit courier services for our business customers. Deposits from commercial business relationships, including business checking, business Centennial savings accounts and business MMDAs, have grown to $24.7 million, an increase of 27%.

Initiatives in the First Federal branch operation increased personal checking deposits 6% to $14.4 million. When the Home Building branch offices are included, personal checking accounts ended the fiscal year at $18.8 million, for a total increase of 38%.

In an effort to increase the Bank’s customer product line and to provide additional fee income to the Bank, six product initiatives were started and completed during the year:

On March 1, 2007, the Bank entered into affiliation with Investment Professionals Inc. to open First Federal Investment Professionals, at the Corporate Headquarters building. First Federal Investment Professionals offer a variety of investment alternatives, including mutual funds, stocks and bonds, fixed and variable annuities, insurance products, financial planning services, and retirement plans for small to middle market companies.
In the fourth quarter, the Bank implemented electronic statements or “e-statements”. “e-statements” allow the customer to electronically receive their monthly checking account statements via the internet. The cost to produce and deliver the “e-statement” is substantially less than to produce a paper statement.
The Bank established an agency relationship to issue VISA credit cards for personal individual use and for our commercial business customers. The Bank receives income for each account opened plus a percentage of the interest income generated.
The Bank developed a Health Savings Account to assist both our individual and commercial customers in saving for and paying medical expenses.
In an effort to better serve our commercial customers located distant from our branches, the Bank introduced Remote Capture. This service allows commercial customers to make check deposits to their accounts using a check scanner and software provided by the Bank. With Remote Capture, the daily run to the Bank to make a deposit is a thing of the past. A high speed internet connection is all that is required for this service.
In May, the Bank announced “Gonzo checking”, a new type of checking account product. Gonzo checking pays a highly competitive market interest rate with the following features: no monthly service fee, no minimum balance requirements and unlimited check writing. In order to qualify for the competitive market rate, customers must have an active e-mail account, sign up for an “e-statement”, and must use their First Federal debit card twelve (12) times per monthly cycle.

Management will continue to look for ways to increase efficiencies and profitability within the organization, while at the same time providing the services our customers need, growing our commercial and individual customer base and working to ensure the success of both our customers and our Company. I thank you for your investment in First Bancorp of Indiana, Inc. Our officers and employees greatly value your confidence in our ability to compete aggressively in an ever changing and challenging marketplace.

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

President's Message

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