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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
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Commission File No. 0-26570
1ST INDEPENDENCE FINANCIAL GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 61-1284899
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
104 South Chiles Street
Harrodsburg, Kentucky 40330-1620
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (502)753-0500
----------
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 |_|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes |_| No |X|
The registrant had 1,946,161 shares of common stock outstanding at
October 28, 2005.
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1st INDEPENDENCE FINANCIAL GROUP, INC.
FORM 10-QSB
For the Quarter Ended September 30, 2005
INDEX
Part I - Financial Information
Item 1. Financial Statements Page Number
-----------
Condensed Consolidated Balance Sheets as of September 30, 2005
(unaudited) and December 31, 2004 3
Condensed Consolidated Statements of Operations for the three
months and nine months ended September 30, 2005 and 2004 (unaudited) 4
Condensed Consolidated Statements of Comprehensive Income (Loss)
for the three months and nine months ended
September 30, 2005 and 2004 (unaudited) 5
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2005 and 2004 (unaudited) 6
Notes to Condensed Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-17
Item 3. Controls and Procedures 17
Part II - Other Information
Item 1. Legal Proceedings 19
Item 6. Exhibits 19
Signatures 20
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
1ST INDEPENDENCE FINANCIAL GROUP, INC.
Condensed Consolidated Balance Sheets
(in thousands except share data)
(Unaudited)
September 30, December 31,
2005 2004
------------- -------------
Assets
Cash and and due from banks $ 3,603 $ 4,131
Interest-bearing demand deposits 5,129 4,749
Federal funds sold 6,240 1,066
------------- -------------
Cash and cash equivalents 14,972 9,946
Inerest-bearing deposits 100 100
Available-for-sale securities at fair value 17,109 26,723
Held-to-maturity securities, fair value of $2,010 and
$2,165 at September 30, 2005 and December 31, 2004, respectively 1,977 2,150
Loans held for sale 2,080 2,344
Loans, net of allowance for loan losses of $2,817 and
$2,549 at September 30, 2005 and December 31, 2004, respectively 265,797 233,648
Premises and equipment, net 7,925 5,385
Federal Home Loan Bank (FHLB) stock 2,659 2,588
Bank owned life insurance 3,187 3,047
Goodwill 11,142 11,142
Interest receivable and other assets 2,586 1,972
Assets of subsidiary held for disposal - 38,146
------------- -------------
Total assets $ 329,534 $ 337,191
============= =============
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand $ 15,240 $ 16,474
Savings, NOW and money market 61,685 45,866
Time 181,761 160,968
------------- -------------
Total depositsdeposits 258,686 223,308
Short-term borrowings 18,440 23,233
Long-term debt 13,279 14,247
Deferred income taxes 17 1,625
Interest payable and other liabilities 1,095 1,161
Liabilities of subsidiary held for disposal - 34,129
------------- -------------
Total liabilitiesal liabilities 291,517 297,703
------------- -------------
Commitments and contingencies - -
Minority interest 8 1,782
Stockholders' equity
Preferred stock, $0.10 par value, 500,000 shares authorized, no
shares issued or outstanding - -
Common stock, $0.10 par value, 5,000,000 shares authorized,
1,945,161 shares and 1,916,368 shares outstanding at
September 30, 2005 and December 31, 2004, respectively 292 289
Additional paid-in capital 39,154 38,588
Retained earnings 13,575 10,122
Unearned ESOP compensation (412) (490)
Unearned compensation on restricted stock (25) -
Accumulated other comprehensive income - 3,772
Treasury stock, at cost, common,
969,835 shares and 969,835 shares at September 30, 2005 and
December 31, 2004, respectively (14,575) (14,575)
------------- -------------
Total stockholders' equity 38,009 37,706
------------- -------------
Total liabilities and stockholders' equity $ 329,534 $ 337,191
============= =============
See notes to condensed consolidated financial statements.
1ST INDEPENDENCE FINANCIAL GROUP, INC.
Condensed Consolidated Statements of Operations
(in thousands except per share data)
(Unaudited) (Unaudited)
Three months ended September 30 Nine months ended September 30,
-------------------------- -------------------------
2005 2004 2005 2004
--------- ----------- ---------- ----------
Interest and dividend income
Interest and fees on loans $ 4,459 $ 2,996 $ 12,256 $ 5,702
Securities
Taxable 166 217 537 657
Tax exempt 28 27 80 66
Federal funds sold 36 51 179 51
Dividends 36 28 103 112
Deposits with financial institutions 41 8 94 18
--------- ----------- ---------- ----------
Total interest and dividend income 4,766 3,327 13,249 6,606
--------- ----------- ---------- ----------
Interest expense
Deposits 1,740 1,124 4,770 2,391
FHLB advances 212 60 509 104
Other 156 123 451 292
--------- ----------- ---------- ----------
Total interest expense 2,108 1,307 5,730 2,787
--------- ----------- ---------- ----------
Net interest income 2,658 2,020 7,519 3,819
Provision for loan losses 60 1,177 262 1,203
--------- ----------- ---------- ----------
Net interest income after provision for loan losses 2,598 843 7,257 2,616
--------- ----------- ---------- ----------
Non-interest income
Service charges 114 61 274 113
Earnings of equity method investee - - - 5
Gain on loan sales 274 315 811 315
Gain (loss) on sale of premises and equipment (144) 1 (162) (89)
Increase in cash surrender value of life insurance 47 45 140 131
Net realized gains (losses) on sales of
available-for-sale securities (129) (4) 4,883 (4)
Other 129 98 476 108
--------- ----------- ---------- ----------
Total non-interest income 291 516 6,422 579
--------- ----------- ---------- ----------
Non-interest expense
Salaries and employee benefits 1,151 944 3,873 1,980
Net occupancy expense 325 424 1,026 567
Data processing fees 169 148 453 249
Professional fees 158 129 638 251
Marketing expense 77 24 135 44
Data processing termination charges - - - 797
Other 368 923 1,418 1,414
---------- ----------- ---------- ----------
Total non-interest expense 2,248 2,592 7,543 5,302
---------- ----------- ---------- ----------
Income (loss) from continuing operations before income
taxes and minority interest 641 (1,233) 6,136 (2,107)
Income tax expense (benefit) from continuing operations 177 (482) 2,079 (839)
---------- ----------- ---------- ----------
Income (loss) from continuing operations before minority
interest and discontinued operations 464 (751) 4,057 (1,268)
Income (loss) from subsidiary held for disposal - (6) 6 (1)
Income tax expense (benefit) from subsidiary held for disposal - (1) 2 13
---------- ----------- ---------- ----------
Income (loss) before minority interest 464 (756) 4,061 (1,282)
Minority interest in (income) loss of consolidated subsidiary and
subsidiary held for disposal (2) 2 (7) 6
---------- ----------- ---------- ----------
Net income (loss) $ 462 $ (754) $ 4,054 $ (1,276)
========== =========== ========== ==========
Income (loss) per share from continuing operations
Basic $0.24 ($0.42) $2.15 ($0.93)
Diluted $0.24 ($0.42) $2.11 ($0.93)
Income (loss) per share from subsidiary held for disposal
Basic $0.00 $0.00 $0.00 ($0.01)
Diluted $0.00 $0.00 $0.00 ($0.01)
Net income per share
Basic $0.24 ($0.43) $2.15 ($0.93)
Diluted $0.24 ($0.43) $2.11 ($0.93)
Weighted average shares outstanding
Basic 1,897 1,771 1,883 1,371
Diluted 1,939 1,771 1,925 1,371
Cash dividends declared per share $0.08 $0.00 $0.32 $0.30
See notes to condensed consolidated financial statements.
1ST INDEPENDENCE FINANCIAL GROUP, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(Unaudited) (Unaudited)
Three months ended September 30 Nine months ended September 30,
--------------------------- --------------------------
2005 2004 2005 2004
--------- -------- --------- ----------
Net income (loss) $ 462 $ (754) $ 4,054 $ (1,276)
Other comprehensive income, net of tax
Change in unrealized gains and losses on
available-for-sale securities (59) 524 (549) 465
Less reclassification adjustment for realized
gains (losses) included in net income (85) (3) 3,223 (3)
--------- -------- -------- --------
Other comprehensive income (loss) 26 527 (3,772) 468
--------- -------- -------- --------
Comprehensive income (loss) $ 488 $ (227) $ 282 $ (808)
========= ======== ======== ========
See notes to condensed consolidated financial statements.
1ST INDEPENDENCE FINANCIAL GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine months ended September 30,
------------------------------
2005 2004
------------ -----------
Cash flows from operating activities:
Net income (loss) $ 4,054 $ (1,276)
Adjustments to reconcile net income (loss) to net cash (used in)
operations:
Depreciation 452 610
Goodwill impairment - 356
Provision for loan losses 262 1,203
Gain on loan sales (811) (315)
Origination of loans held for sale (47,716) (16,263)
Proceeds from loans held for sale 48,791 15,750
ESOP compensation 151 63
Amortization of unearned compensation on restricted stock 3 -
Amortization of premiums and discounts on securities 100 164
Deferred income taxes 336 (766)
FHLB stock dividend (70) (58)
Increase in equity investment of subsidiary - 14
Amortization of loan fees (237) (128)
Amortization of intangibles, net 272 107
Net realized (gains) losses on available-for-sale securities (4,883) 4
Loss on sale of premises and equipment 162 89
Minority interest in income (loss) of consolidated subsidiary and
subsidiary held for disposal 7 (6)
Increase in cash value of life insurance (140) (131)
(Income) loss from subsidiary held for disposal (4) 14
Changes in:
(Increase) in interest receivable and other assets (682) (332)
(Decrease) increase in interest payable and other liabilities (65) 418
------------ -----------
Net cash (used in) operating activities (18) (483)
------------ -----------
Cash flows from investing activities:
Purchases of available-for-sale securities (6,321) (946)
Proceeds from maturities of available-for-sale securities 3,731 8,323
Proceeds from sales of available-for-sale securities 11,267 1,239
Proceeds from maturities of held-to-maturity securities 165 2,555
Net (increase) in loans (32,349) (7,055)
Purchases of premises and equipment (3,178) (1,822)
Proceeds from sales of premises and equipment 24 -
Proceeds from sale of subsidiary 2,300 -
Net cash acquired in business acquisition - 8,462
------------ -----------
Net cash (used in) provided by investing activities (24,361) 10,756
------------ -----------
Cash flows from financing activities:
Net increase (decrease) in deposits 35,332 (9,279)
Net (decrease) increase in short-term borrowings (4,793) 7,120
Proceeds from long-term debt - 155
Repayment of long-term debt (1,000) (1,400)
Purchase of treasury stock - (193)
Proceeds from exercise of stock options 415 83
Proceeds from ESOP plan contributions 52 -
Cash dividends paid (601) (517)
------------ -----------
Net cash provided by (used in) financing activities 29,405 (4,031)
------------ -----------
Net increase in cash and cash equivalents 5,026 6,242
Cash and cash equivalents at beginning of period 9,946 5,822
------------ -----------
Cash and cash equivalents at end of period $ 14,972 $ 12,064
============ ===========
Supplemental cash flow information:
Interest paid $ 5,547 $ 2,609
Income taxes paid 1,680 82
Net (decrease) increase in cash and cash equivalents of discontinued
operations (1,795) 468
Supplemental non-cash activity:
Real estate acquired in settlement of loans 33 -
See notes to condensed consolidated financial statements.
1st INDEPENDENCE FINANCIAL GROUP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated financial statements are presented in
accordance with the requirements of Form 10-QSB and consequently do not include
all the disclosures normally required by accounting principles generally
accepted in the United States of America. These condensed consolidated financial
statements and notes thereto included in this report should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Form 10-KSB annual report for the three months ended
December 31, 2004 filed with the Securities and Exchange Commission. The
condensed consolidated financial statements have been prepared in accordance
with the customary accounting practices of 1st Independence Financial Group,
Inc. (the "Company") and have not been audited. In the opinion of management,
all adjustments necessary to make the financial statements not misleading and to
fairly present the results of operations and cash flows for the reporting
interim periods have been made and were of a normal recurring nature. The
results of operations for the period are not necessarily indicative of the
results to be expected for the full year. The condensed consolidated balance
sheet of the Company as of December 31, 2004 has been derived from the audited
consolidated balance sheet of the Company as of that date.
The unaudited condensed financial statements include the accounts of the Company
and its wholly-owned subsidiary, 1st Independence Bank, Inc. (the "Bank"),
Foundation Title Company, LLC, a majority-owned subsidiary of the Bank, 1st
Independence Mortgage, a division of the Bank and for periods prior to its sale
on January 28, 2005, the Company's majority-owned subsidiary Citizens Financial
Bank, Inc. ("Citizens"). As a result of the Company's sale of Citizens, the
assets, liabilities, results of operations and cash flows of Citizens have been
reported separately as discontinued operations in the Company's condensed
consolidated financial statements and previously reported amounts have been
reclassified to consistently present the discontinued operations.
2. Stock-Based Compensation
At September 30, 2005, the Company had two stock-based compensation plans. As
permitted by Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS No. 123"), the Company follows the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations in accounting for its stock
option plans under the intrinsic value based method. Accordingly, no stock-based
compensation expense has been recognized for stock options issued under the
plans as all stock options granted under the plans had an exercise price equal
to the market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and basic and diluted net
income per share had compensation expense been determined based on the fair
value of the stock options at the grant date consistent with the provisions of
SFAS No. 123 (in thousands except per share data):
Three months ended
September 30,
2005 2004
---- ----
Net income (loss) as reported $462 ($754)
Less total stock-based employee compensation expense
(including forfeitures of $20 and $0) determined under fair
value method for all awards, net of related tax effects (14) -
---- ----
Pro forma net income (loss) $476 ($754)
==== ====
Basic net income (loss) per share
As reported $0.24 ($0.43)
Pro forma 0.25 (0.43)
Diluted net income (loss) per share
As reported $0.24 ($0.43)
Pro forma 0.25 (0.43)
Nine months ended
September 30,
2005 2004
---- ----
Net income (loss) as reported $4,054 ($1,276)
Less total stock-based employee compensation expense
(including forfeitures of $65 and $0) determined under fair
value method for all awards, net of related tax effects (52) 2
------ -----
Pro forma net income (loss) $4,106 ($1,278)
====== ======
Basic net income (loss) per share
As reported $2.15 ($0.93)
Pro forma 2.18 (0.93)
Diluted net income (loss) per share
As reported $2.11 ($0.93)
Pro forma 2.14 (0.93)
3. Allowance for Loan Losses
An analysis of the changes in the allowance for loan losses for the nine months
ended September 30 follows (in thousands):
2005 2004
---- ----
Beginning balance $2,549 $ 391
Addition resulting from acquisition - 1,046
Provision for loan losses 262 1,203
Loans charged off (6) (84)
Recoveries 12 4
------ ------
Ending balance $2,817 $2,560
====== ======
4. Net Income Per Share Computations
The following is a reconciliation of the numerator and denominator of the basic
and diluted per share computations (in thousands except per share data):
Three months ended
September 30,
2005 2004
---- ----
Income (numerator) amounts used for basic and diluted per share computations:
Income (loss) from continuing operations $464 ($751)
==== =====
Income (loss) from discontinued operations $ - $ (5)
==== =====
Net income (loss) $462 ($754)
==== =====
Shares (denominator) used for basic per share computations:
Weighted average shares of common stock outstanding 1,897 1,771
===== =====
Shares (denominator) used for diluted per share computations:
Weighted average shares of common stock outstanding 1,897 1,771
Plus: dilutive effect of stock options 42 -
----- -----
Adjusted weighted average shares 1,939 1,771
===== =====
Basic net income (loss) per share data:
Income (loss) from continuing operations $0.24 ($0.42)
===== ======
Income from discontinued operations $ - $ -
===== ======
Net income (loss) $0.24 ($0.43)
===== ======
Diluted net income (loss) per share data:
Income (loss) from continuing operations $0.24 ($0.42)
===== ======
Income from discontinued operations $ - $ -
===== ======
Net income (loss) $0.24 ($0.43)
===== ======
Nine months ended
September 30,
2005 2004
---- ----
Income (numerator) amounts used for basic and diluted per share computations:
Income (loss) from continuing operations $4,057 ($1,268)
====== ======
Income (loss) from discontinued operations $ 4 $ (14)
====== ======
Net income (loss) $4,054 ($1,276)
====== ======
Shares (denominator) used for basic per share computations:
Weighted average shares of common stock outstanding 1,883 1,371
===== =====
Shares (denominator) used for diluted per share computations:
Weighted average shares of common stock outstanding 1,883 1,371
Plus: dilutive effect of stock options 42 -
----- -----
Adjusted weighted average shares 1,925 1,371
===== =====
Basic net income (loss) per share data:
Income (loss)from continuing operations $2.15 ($0.93)
===== ======
Income (loss) from discontinued operations $ - ($0.01)
===== ======
Net income (loss) $2.15 ($0.93)
===== ======
Diluted net income (loss) per share data:
Income (loss) from continuing operations $2.11 ($0.93)
===== ======
Income (loss) from discontinued operations $ - ($0.01)
===== ======
Net income (loss) $2.11 ($0.93)
===== ======
Options to purchase 255,300 and 200,000 common shares, which equate to 49,726
and 48,022 incremental common equivalent shares, respectively, for the three
months and nine months ended September 30, 2004 were excluded from the diluted
calculations above as their effect would have been antidilutive.
5. Contingencies
The Company is a defendant in a lawsuit that asserts that the Company made
certain material misrepresentations in connection with certain statements made
in connection with its offer to purchase up to 300,000 shares of stock in a
tender offer in May 2003. The plaintiffs are seeking to recover damages in
connection with the shares they sold in the tender offer and attorneys fees.
Based upon the advice of counsel, management records an estimate of the amount
of ultimate expected loss for litigation, if any. Management has not recorded a
loss provision for this litigation as, after discussion with legal counsel,
management believes the ultimate results of this litigation will not have a
material adverse effect on the Company's financial position, results of
operations or cash flows. Events could occur that could cause the estimate of
ultimate loss to differ materially in the near term. Reference is made to Part
II, Item 1 of this report on Form 10-QSB for additional information.
6. Recently Issued Accounting Standards
In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No.123 (revised 2004), "Share-Based
Payment" ("SFAS 123R"). This Statement requires expensing of stock options and
other share-based payments over the related vesting period beginning in 2005,
and supersedes FASB's earlier rule (the original SFAS 123) that had allowed
companies to choose between expensing stock options and showing pro forma
disclosure only. The Statement required that public entities (other than those
filing as small business issuers) apply SFAS 123R as of the first interim or
annual reporting period that begins after June 15, 2005. However, in April 2005
the Securities and Exchange Commission issued a rule that revises the required
date of adoption under SFAS 123R. The new rule allows for public entities to
adopt the provisions of SFAS 123R at the beginning of the first fiscal year
beginning after June 15, 2005. Public entities that file as small business
issuers will continue to be required to apply SFAS 123R in the first interim or
annual reporting period that begins after December 15, 2005. The Company, which
will adopt the Statement in the first quarter of 2006 as required, is currently
evaluating the effect of the adoption of this Statement, but does not expect
adoption to have a material impact relating to outstanding stock options since a
majority of the awards under the existing stock-based compensation plans will be
fully vested prior to the effective date of the revised rules.
7. Completion of Subsidiary Disposal
On January 28, 2005 the Company completed the sale of its entire interest in its
majority owned subsidiary, Citizens Financial Bank, Inc., to Porter Bancorp,
Inc. for $2.3 million, pursuant to a Stock Purchase Agreement, dated as of
October 22, 2004, between Porter Bancorp, Inc. and the Company. In a related
transaction, on January 28, 2005, the Company's subsidiary bank, 1st
Independence Bank, Inc., purchased a commercial building located in Louisville,
Kentucky, for $2.3 million from Ascencia Bank, Inc., an affiliate of Porter
Bancorp, Inc. See note 4, "Subsidiary Held for Disposal" to the consolidated
financial statements included in the Company's Form 10-KSB for the year ended
December 31, 2004 for additional information.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This section should be read in conjunction with the condensed consolidated
financial statements and notes thereto included in Item 1 of Part I of this
report in addition to the consolidated financial statements of the Company and
the notes thereto included in the Company's Form 10-KSB for the year ended
December 31, 2004, including note 1 which describes the Company's significant
accounting policies including its use of estimates. See the caption entitled
"Application of Critical Accounting Policies" in this section for further
information.
Forward-Looking Statements
The following discussion contains statements which are forward-looking rather
than historical fact. These forward-looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995
and involve known and unknown risks, uncertainties and other factors, which may
cause the Company's actual results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such statements are subject to certain risks and
uncertainties including among other things, changes in economic conditions in
the market areas the Company conducts business, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in the
market areas the Company conducts business, competition that could cause actual
results to differ materially from historical earnings and those presently
anticipated or projected and other risks as detailed in the Company's various
filings with the Securities and Exchange Commission. The Company wishes to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made.
General
On July 9, 2004, the Company changed its name to 1st Independence Financial
Group, Inc. and acquired the remaining 77.5% interest of Independence Bancorp,
New Albany, Indiana ("Independence") in a purchase transaction calling for the
exchange of one share of its common stock for each share of Independence common
stock held by Independence shareholders (the "Merger"). The Company initially
acquired 22.5% of Independence on December 31, 2002. Upon completion of the
Merger, the Company issued approximately 696,000 shares to the Independence
shareholders and exchanged approximately 60,000 stock options held by directors,
executive officers, and employees of Independence.
In connection with the Merger, the Company's, wholly owned subsidiary, First
Financial Bank and Independence's wholly owned subsidiary, 1st Independence Bank
merged their operations (the "Bank Merger"). The Bank Merger occurred at the
same time as the Merger and the resulting institution became a Kentucky
state-chartered bank known as 1st Independence Bank, Inc. (the "Bank").
The Company provides commercial and retail banking services, including
commercial real estate loans, one-to-four family residential mortgage loans via
1st Independence Mortgage, home equity loans and lines of credit and consumer
loans as well as certificates of deposit, checking accounts, money-market
accounts and savings accounts within its market area. At September 30, 2005, the
Company had total assets, deposits and stockholders' equity of $329.5 million,
$258.7 million, and $38.0 million, respectively. The Company's business is
conducted principally through the Bank. Unless otherwise indicated, all
references to the Company refer collectively to the Company and the Bank.
As a result of completing the acquisition of Independence, the Company gained
access to customers in the Louisville, Kentucky metro area. Accordingly, the
Company has experienced a significantly different mix of loan growth since the
completion of the acquisition. The Company historically provided primarily
residential real estate loan products in its markets in central Kentucky.
The Company is a defendant in a lawsuit that asserts that the Company made
certain material misrepresentations in connection with its offer to purchase up
to 300,000 shares of stock in a tender offer in May 2003. The plaintiffs are
seeking to recover damages in connection with the shares they sold in the tender
offer and attorneys fees. Based upon the advice of counsel, management records
an estimate of the amount of ultimate expected loss for litigation, if any.
Management has not recorded a loss provision for this litigation as, after
discussion with legal counsel, management believes the ultimate result of this
litigation will not have a material adverse effect on the Company's financial
position, results of operations or cash flows. Events could occur that could
cause the estimate of ultimate loss to differ materially in the near term.
In January 2005, the Company sold its 55.8% interest in Citizens Financial Bank,
Inc., Glasgow, Kentucky ("Citizens") to Porter Bancorp, Inc., Shepherdsville,
Kentucky ("Porter Bancorp") for $2.3 million. The sale of Citizens reflected the
Company's revised strategic plan to exit the south central Kentucky market and
to focus on the growing markets of southern Indiana, central Kentucky, and
greater Louisville, Kentucky.
The Bank also purchased property and a building, located in Louisville,
Kentucky, that was previously used as an operations center and retail branch of
Ascencia Bank, an affiliate of Porter Bancorp. The purchase price of the
building and property was equal to $2.3 million. The Bank moved its finance and
accounting, loan and deposit operations, and mortgage banking operations into
the building in April 2005. The Bank also received regulatory approval during
the second quarter of 2005 to establish a full service branch at this location.
The Bank anticipates opening the branch during the fourth quarter of 2005.
Application of Critical Accounting Policies
The discussion and analysis of the Company's financial condition and results of
operation is based upon the Company's condensed consolidated financial
statements, which have been prepared in conformity with accounting principles
generally accepted in the United States of America. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The Company's most critical accounting policies require the use of
estimates relating to other than temporary impairment of securities, the
allowance for loan losses and the valuation of goodwill. See the caption
entitled "Critical Accounting Policies" in the Management's Discussion and
Analysis of Financial Condition and Results of Operations section of the
Company's Form 10-KSB for the year ended December 31, 2004 for additional
information.
Overview
Net income for the quarter ended September 30, 2005 was $462,000 or $0.24 per
diluted share compared to a loss of ($754,000) or ($0.43) per diluted share for
the comparable period in 2004. Net income for the nine months ended September
30, 2005 was $4,054,000 or $2.11 per diluted share compared to a loss of
($1,276,000) or ($0.93) per diluted share for the nine months ended September
30, 2004. The increases in net income and net income per diluted share for the
nine month period were primarily due to after tax securities gains of $3,308,000
taken in the first quarter of 2005 and the significance of the Merger to the
Company's operations including an after tax charge of approximately $526,000
recorded in the second quarter of 2004 in connection with the termination of a
data processing contract. Other factors which contributed to the increase were a
decrease of $621,000, after taxes, in the provision for loan losses taken in the
nine months ended September 30, 2005 compared to the same period in 2004, an
after tax charge of $158,000 relating to the Bank's termination of its pension
plan in the third quarter of 2004, a $356,000 goodwill writeoff recorded in the
third quarter of 2004 in regards to the Citizens disposal and certain
merger-related expenses also taken in the third quarter of 2004. Partially
offsetting these factors was an after tax charge of $235,000 recorded in the
first quarter 2005 for severance expenses related to the retirement of the
Company's former Chairman and CEO. The increases in net income and net income
per diluted share for the quarter were primarily due to the decrease of $737,000
after taxes in the provision for loan losses and to a lesser extent the effects
of the Merger which was effective for 90% of the third quarter of 2004 as
opposed to 100% in the third quarter of 2005. Other factors which contributed to
the increase which were previously mentioned above were the after tax charge of
$158,000 relating to the Bank's termination of its pension plan in the third
quarter of 2004, a $356,000 goodwill writeoff recorded in the third quarter of
2004 in regards to the Citizens disposal and certain merger-related expenses
also taken in the third quarter of 2004. Partially offsetting these factors was
an after tax loss of $95,000 on the disposal of fixed assets recorded in the
third quarter of 2005 and an increase in the net realized losses on sales of
available-for-sale securities in the third quarter of 2005 compared to the third
quarter of 2004.
Results of Operations
Net Interest Income
Net interest income is the most significant component of the Company's revenues.
Net interest income is the difference between interest income on
interest-earning assets (primarily loans and investment securities) and interest
expense on interest-bearing liabilities (deposits and borrowed funds). Net
interest income depends on the volume and rate earned on interest-earning assets
and the volume and rate paid on interest-bearing liabilities.
Net interest income was $2.7 million and $7.5 million, respectively, for the
three months and nine months ended September 30, 2005, an increase of $0.7
million or 32% and $3.7 million or 97%, respectively, from $2.0 million and $3.8
million, respectively, for the comparable periods of 2004. On an annualized
basis, the net interest spread and net interest margin were 3.21% and 3.51%,
respectively, for the current quarter, compared to 3.25% and 3.49% for the same
period of 2004. For the nine months ended September 30, 2005 the net interest
spread and net interest margin were 3.16% and 3.45%, respectively, compared to
3.00% and 3.22% for the nine months ended September 30, 2004. The increases in
the net interest margin were primarily due to an increase in the volume of net
interest bearing assets, primarily resulting from the Merger for the nine-month
period and due to loan growth in the three-month period. Changes in volume
resulted in an increase in net interest income of $0.8 million and $3.8 million
for the third quarter and first nine months of 2005 compared to the same periods
in 2004, and changes in interest rates and the mix resulted in a decrease in net
interest income of $0.1 million for both the three months ended September 30,
2005 and nine months ended September 30, 2005 versus the comparable periods in
2004.
The Bank, like many other financial institutions, is vulnerable to an increase
in interest rates to the extent that interest-bearing liabilities mature or
reprice more rapidly than interest-earning assets. Historically, the lending
activities of commercial banks emphasized the origination of short to
intermediate term variable rate loans that are more closely matched with the
deposit maturities and repricing of interest-bearing liabilities which occur
closer to the same general time period. While having interest-bearing
liabilities that reprice more frequently than interest-earning assets is
generally beneficial to net interest income during periods of declining interest
rates, it is generally detrimental during periods of rising interest rates.
To reduce the effect of interest rate changes on net interest income, the Bank
has adopted various strategies to improve matching interest-earning asset
maturities to interest-bearing liability maturities. The principal elements of
these strategies include; originating variable rate commercial loans that
include interest rate floors; originating one-to-four family residential
mortgage loans with adjustable rate features, or fixed rate loans with short
maturities; maintaining interest-bearing demand deposits, federal funds sold,
and U.S. government securities with short to intermediate term maturities;
maintaining an investment portfolio that provides stable cash flows, thereby
providing investable funds in varying interest rate cycles; lengthening the
maturities of our time deposits and borrowings when it would be cost effective;
and attracting low cost checking and transaction accounts, which tend to be less
interest rate sensitive when interest rates increase.
The Bank measures its exposure to changes in interest rates using an overnight
upward and downward shift (shock) in the Treasury yield curve. As of September
30, 2005, if interest rates increased 200 basis points and decreased 200 points,
respectively, the Bank's net interest margin would increase by 2.6% and decrease
by 4.6%, respectively.
Provision for Loan Losses
The provision for loan losses was $60,000 and $262,000 for the three months and
nine months ended September 30, 2005, compared to $1,177,000 and $1,203,000 for
the same periods in 2004. Nonperforming loans were $1.2 million at both
September 30, 2005 and December 31, 2004, or 0.46% and 0.52%, respectively, of
total loans. The allowance for loan losses was $2.8 million and $2.5 million at
September 30, 2005 and December 31, 2004, or 1.05% and 1.08%, respectively, of
total loans. The higher amounts of provision for loan losses in the 2004 periods
compared to 2005 were primarily attributable to the changes in the loan mix as a
result of the Merger, as described below.
The Company maintains the allowance for loan losses at a level that it considers
to be adequate to provide for credit losses inherent in its loan portfolio.
Management determines the level of the allowance by performing a quarterly
analysis that considers concentrations of credit, past loss experience, current
economic conditions, the amount and composition of the loan portfolio (including
nonperforming and potential problem loans), estimated fair value of underlying
collateral, loan commitments outstanding, and other information relevant to
assessing the risk of loss inherent in the loan portfolio. As a result of
management's analysis, a range of the potential amount of the allowance for loan
losses is determined. Management consistently adjusts the allowance to the
mid-point of the range.
Prior to the acquisition of Independence, the Company operated as a thrift and
provided primarily residential real estate loan products in its markets in
central Kentucky. As a result of the Merger and the Bank's conversion to a
state-chartered commercial bank, management made the decision to no longer
originate long-term residential real estate loans for its loan portfolio. The
Company's loan growth since the Merger has primarily consisted of shorter-term
construction loans, commercial real estate loans, other commercial loans and
other loan types traditional to the banking industry. The Company therefore has
different risk characteristics including but not limited to higher individual
loan amounts and increased exposure to economic conditions.
The Company will continue to monitor the adequacy of the allowance for loan
losses and make additions to the allowance in accordance with the analysis
referred to above. Because of uncertainties inherent in estimating the
appropriate level of the allowance for loan losses, actual results may differ
from management's estimate of credit losses and the related allowance.
Non-interest Income
Non-interest income was $0.3 million for the three months ended September 30,
2005, compared to $0.5 million for the same period in 2004 and $6.4 million for
the nine months ended September 30, 2005, compared to $0.6 million for the nine
months ended September 30, 2004. Significant increases in non-interest income
for the nine-month period resulted from a $5.0 million gain on sale of Federal
Home Loan Mortgage Corporation (FHLMC) preferred stock recorded in the first
quarter of 2005 and effecting the nine-month period were gains on loan sales.
The gains on loan sales represents a new source of non-interest income to the
Company, as the Company did not previously engage in significant secondary
market sales prior to the Merger. The three-month decrease was primarily due to
the $144,000 loss relating to sales of premises and equipment recorded in the
third quarter of 2005 compared to a gain of $1,000 in the comparable period in
2004 and net realized losses on sales of available-for-sale securities of
$129,000 compared to losses of $4,000 in the third quarter of 2004. Service
charge income was $114,000 for the three months ended September 30, 2005,
compared to $61,000 for the comparable period in 2004 and $274,000 for the first
nine months of 2005, compared to $113,000 for the nine months ended September
30, 2004. The nine month increases were primarily attributable to the Merger.
Traditionally, the Company did not have significant service charge income since
the vast majority of their deposit accounts were consumer accounts. The Company
continues to evaluate its deposit product offerings with the intention of
expanding its offerings to the consumer and business depositor. During March
2005, the Bank began offering products which include overdraft privileges on
certain individual deposit products and cash management services for business
depositors. Both of these products are fee-based and should result in further
increases in service charge income. The Bank also introduced a new deposit
product known as "ATM Advantage" during September 2005. This new product offers
unlimited use of competitor's ATM networks with reimbursement of all foreign and
surcharge fees. The product does not pay interest but requires a minimum balance
to avoid a monthly service charge. This product could reduce service charge
income but the effect would be offset by more non-interest bearing deposits
which should contribute to additional net interest income. Contributing to the
three-month and nine-month increases in other non-interest income were the
effects of the Merger and approximately $70,000 and $201,000 of title insurance
revenue for the three months and nine months ended September 30, 2005,
respectively, from the Company's title insurance company which began operations
in November 2004.
Non-interest Expense
Non-interest expense was $2.2 million for the quarter ended September 30, 2005
compared to $2.6 million the same period in 2004 and $7.5 million for the nine
months ended September 30, 2005 compared to $5.3 million for the nine months
ended September 30, 2004. All categories of non-interest expense for the
nine-month period ended September 30, 2005 increased significantly over the
comparable period in 2004 as a result of the Merger which was effective on July
9, 2004 except for other non-interest expense which was flat due to several
items recorded in the third quarter of 2004 that did not recur in 2005. In
addition, contributing to the nine-month increase in salaries and employee
benefits was $356,000 which the Company accrued during the first quarter of 2005
for the severance expense relating to the retirement of the Company's former
Chairman and CEO. Factors limiting the nine-month increase were $797,000 of
charges recorded in the second quarter of 2004 in connection with the
termination of a data processing contract, $239,000 relating to the Bank's
termination of its pension plan in the third quarter of 2004, and items
effecting other non-interest expense were a $356,000 goodwill writeoff recorded
in the third quarter of 2004 in regards to the Citizens disposal and certain
merger-related expenses also taken in the third quarter of 2004. The three month
period ended September 30, 2005 was more comparable to the same quarter in 2004
as the Merger was effective for approximately 90% of the third quarter of 2004.
However, certain items which were recorded in the third quarter of 2004 and did
not recur in the third quarter of 2005 contributed to the decrease in the third
quarter of 2005 compared to the third quarter 2004. Among these were previously
mentioned items of $239,000 relating to the Bank's termination of its pension
plan in the third quarter of 2004, and effecting other non-interest expense were
a $356,000 goodwill writeoff recorded in the third quarter of 2004 in regards to
the Citizens disposal and certain other merger-related expenses also taken in
the third quarter of 2004.
Income Tax Expense (Benefit)
The effective income tax rate on income (loss) from continuing operations was
27.6% for the three months ended September 30, 2005 compared to (39.0%) for the
same period in 2004 and 33.9% for the nine months ended September 30, 2005
compared to (39.8%) for the first half of 2004.
Financial Condition
The Company's total assets were $329.5 million at September 30, 2005 compared to
$337.2 million at December 31, 2004, a decrease $7.7 million or 2.3%. The
decrease in total assets was primarily due to the sale of Citizens, which
accounted for $38.1 million of the decrease, and a decrease of $9.6 million in
available-for-sale securities, offset by a $32.2 million increase in net loans,
a $5.0 million increase in cash and cash equivalents and a $2.5 million increase
in premises and equipment. The increase in premises and equipment resulted from
the purchase of property and a building which is being used for the Company's
finance and accounting, loan and deposit operations, and mortgage banking
operations, and the purchase of a branch that was previously leased.
Securities available for sale decreased $9.6 million during the nine months
ended September 30, 2005. The decrease was primarily due to the sale of FHLMC
preferred stock for $5.1 million during the first quarter of 2005 and proceeds
from maturities of securities amounting to $3.7 million. The Company owned the
FHLMC preferred stock for a number of years, and its cost basis was $75,000.
Given the significant amount of unrealized appreciation on the FHLMC preferred
stock, management determined that it was appropriate to sell the FHLMC preferred
stock. The aggregate proceeds on the sale were $5.1 million; therefore a gain of
$5.0 million was realized. Other changes in securities available for sale
included an $833,000 decrease in unrealized gains on the available for sale
portfolio.
Net loans were $265.8 million at September 30, 2005, compared to $233.6 million
at December 31, 2004, an increase of $32.2 million or 13.8%. The significant
increases in loans were in the real estate construction and real estate
commercial loan portfolios, which increased $14.7 million or 44% and $11.8
million or 33%, respectively. The increases were primarily a result of lending
activity in the Louisville, Kentucky metro market. All loan categories increased
or remained the same as a percentage of total loans, except residential real
estate loans, which decreased from approximately 53% to 47% of total loans and
consumer other which decreased from 2% to 1% of total loans. The decrease in
residential real estate loans as a percentage of total loans is primarily due to
those loans now being sold in the secondary market through 1st Independence
Mortgage, a division of the Bank, rather than being retained for the Company's
loan portfolio. The Company continues to identify opportunities to cross sell
its other products, including home equity and consumer loans for its loan
portfolio resulting from customer relationships established through the
origination of loans by 1st Independence Mortgage.
Deposits increased $35.4 million or 15.8% to $258.7 million at September 30,
2005 compared to December 31, 2004. This increase was largely attributable to a
$15.8 million increase in savings, NOW and money market deposits and a $20.8
million increase in time deposits. Demand deposits decreased $1.2 million. The
increase in savings, NOW and money market deposits resulted primarily from the
effects of a general marketing campaign during the first nine months of 2005
focusing on existing products and print advertisements only. As previously
mentioned, during September 2005 the Company introduced a new deposit product
known as "ATM Advantage" as part of its efforts to continue to grow core
deposits. This new product offers unlimited use of competitor's ATM networks
with reimbursement of all foreign and surcharge fees. The product does not pay
interest but requires a minimum balance to avoid a monthly service charge. The
product was introduced using television advertisements and billboards in
addition to print advertisements.
Short-term borrowings decreased $4.8 million or 20.6% to $18.4 million at
September 30, 2005, compared to $23.2 million at December 31, 2004. The Company
uses short-term borrowings, primarily short-term Federal Home Loan Bank (FHLB)
advances, to fund short-term liquidity needs and manage net interest margin. The
decrease in short-term borrowings was related to payoffs of borrowings due to
the Bank's excess liquidity.
Deferred income taxes decreased $1.6 million to $17,000 at September 30, 2005,
and interest payable and other liabilities, decreased $0.1 million to $1.1
million. These changes primarily result from the $1.7 million income tax effect
from the first quarter 2005 sale of FHLMC preferred stock.
Off-Balance Sheet Arrangements
In the normal course of operations, the Company engages in financial
transactions that contain credit, interest rate, and liquidity risk that are not
recorded in the financial statements such as loan commitments and performance
letters of credit. As of September 30, 2005, unused loan commitments and
performance letters of credit were $53,218,000 and $2,079,000, respectively.
Since many of the unused loan commitments are expected to expire or be only
partially used, the total amount of commitments does not necessarily represent
future cash requirements.
Liquidity and Capital Resources
Liquidity to meet borrowers' credit and depositors' withdrawal demands is
provided by maturing assets, short-term liquid assets that can be converted to
cash and the ability to attract funds from depositors. Additional sources of
liquidity include brokered deposits, advances from the FHLB and other short-term
borrowings, such as federal funds purchased and securities sold under repurchase
agreements.
During 2004, the Bank assumed liabilities for brokered deposits as a result of
the Merger. At September 30, 2005 and December 31, 2004, brokered deposits were
$69.0 million and $35.5 million, respectively. The weighted average cost and
maturity of brokered deposits were 3.66% and six months at September 30, 2005
compared to 2.77% and nine months at December 31, 2004. The Company plans to
continue using brokered deposits for the foreseeable future to support expected
loan demand in its new market area when pricing for brokered deposits is more
favorable than short-term borrowings.
At September 30, 2005 and December 31, 2004, the Bank had total FHLB advances
outstanding of approximately $22.0 million and $27.5 million, respectively, with
$4.0 million and $5.0 million at September 30, 2005 and December 31, 2004,
respectively, included in long-term debt in the accompanying condensed
consolidated balance sheet and the remaining amount included in short-term
borrowings. Additionally, the Bank had $22.0 million of unused commitments under
its line of credit with the FHLB and sufficient collateral to borrow an
additional $60.3 million.
The Company's liquidity depends primarily on dividends paid to it as sole
shareholder of the Bank. At September 30, 2005, the Bank may pay up to $5.6
million in dividends to the Company without regulatory approval, subject to the
ongoing capital requirements of the Bank.
The Company has $9.3 million of subordinated debentures outstanding, which are
included in long-term debt in the accompanying condensed consolidated balance
sheet. Approximately $4.1 million of the debentures are variable rate
obligations with interest rates that reprice quarterly, and are tied to the
three-month London Interbank Offering Rate (LIBOR) plus 3.15%. The remaining
$5.2 million of debentures carry a fixed interest rate of 6.4% until March 26,
2008 when the debentures become variable rate obligations that reprice quarterly
at the three-month LIBOR rate plus 3.15%. The Company also had a $2.5 million
unused line of credit with an unaffiliated bank at September 30, 2005.
Stockholders' equity increased $0.3 million from $37.7 million at December 31,
2004 to $38.0 million at September 30, 2005. The significant drivers of the
change were net income of $4.1 million, cash dividends declared of $0.6 million
($0.32 per share), an increase of $0.6 million relating to stock option and ESOP
plan transactions and a decrease in accumulated other comprehensive income of
$3.8 million. The decrease in accumulated other comprehensive income was
primarily due to a $3.3 million (net of income tax) reclassification adjustment
associated with the sale of the FHLMC preferred stock previously discussed and a
$0.5 million (net of income tax) decrease related to unrealized losses on
securities available for sale arising during the period. The reclassification
adjustment is necessitated due to the realized gain on the sale being included
in net income for the period.
Bank holding companies and their subsidiary banks are required by regulators to
meet risk based capital standards. These standards, or ratios, measure the
relationship of capital to a combination of balance sheet and off-balance sheet
risks. The following table presents these ratios as of September 30, 2005 and
December 31, 2004 for the Consolidated Company and the Bank along with the
regulator's minimum ratio to be considered well capitalized.
To Be Well
September 30, 2005 December 31, 2004 Capitalized
------------------ ----------------- -----------
Total risk-based capital to risk-weighted assets
Consolidated company 15.1% 15.6% 10.0%
Bank 13.4 15.1 10.0
Tier 1 capital to risk-weighted assets
Consolidated company 14.0 13.3 6.0
Bank 12.3 12.7 6.0
Tier 1 capital to average assets
Consolidated company 11.3 9.6 5.0
Bank 10.0 9.5 5.0
Item 3. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company's management carried out an evaluation, with
the participation of the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the Company's disclosure controls and
procedures as of the end of the quarter ended September 30, 2005. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in its reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms.
(b) Changes in Internal Control over Financial Reporting
There have not been any changes in the Company's internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act)
during the quarter ended September 30, 2005 that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company, from time to time, is a party to ordinary routine litigation, which
arises in the normal course of business, such as claims to enforce liens,
condemnation proceedings on properties in which the Company holds security
interests, claims involving the making and servicing of real property loans, and
other issues incident to its business. Except as discussed below, there were no
potentially material lawsuits or other legal proceedings pending or known to be
contemplated against the Company at September 30, 2005.
On or about May 28, 2004, a complaint was filed in the Circuit Court of Anderson
County in the Commonwealth of Kentucky by Larry Sutherland, Judy Sutherland,
John Henry Disponett, Brenda Disponett, Todd Hyatt, Lois Ann Disponett, Sue
Saufley, and Hugh Coomer. Soon thereafter, an amended complaint was filed which
added Lois Hawkins and Norma K. Barnett as plaintiffs. The lawsuit arises from
offers to purchase securities made by the Company in connection with an offer to
purchase up to 300,000 shares of its stock in a tender offer on or about May 28,
2003. The Plaintiffs allege that the Company made certain material
misrepresentations in connection with certain statements made in the tender
offer. The Plaintiffs are seeking to recover compensatory and punitive damages
in connection with the shares it sold in the tender offer and their attorneys'
fees. Discovery in the matter is currently underway and a trial date has not
been set. Based upon the advice of counsel, management records an estimate of
the amount of ultimate expected loss for litigation, if any. Management, after
discussion with legal counsel, believes the ultimate result of this litigation
will not have a material adverse effect on the Company's financial position,
results of operations or cash flows. However, events could occur that could
cause any estimate of ultimate loss to differ materially in the near term.
Item 6. Exhibits
(a) Exhibits
31.1 Rule 13a-14(a) / 15d-14(a) Certification of Principal
Executive Officer ("Section 302 Certifications").
31.2 Rule 13a-14(a) / 15d-14(a) Certification of Principal
Financial Officer ("Section 302 Certifications").
32.1 Section 1350 Certifications ("Section 906
Certifications").
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
1st INDEPENDENCE FINANCIAL GROUP, INC.
By: /s/ N. William White
----------------
N. William White
President and Chief Executive Officer
Date: November 4, 2005
Exhibit Index
Exhibit
Number Description
31.1 Rule 13a-14(a) / 15d-14(a) Certification of Principal
Executive Officer ("Section 302 Certifications").
31.2 Rule 13a-14(a) / 15d-14(a) Certification of Principal
Financial Officer ("Section 302 Certifications").
32.1 Section 1350 Certifications ("Section 906
Certifications").