SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of the SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission file number: 0-28510
HOME FINANCIAL BANCORP
(Exact name of registrant specified in its charter)
Indiana 35-1975585
- ---------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
279 East Morgan Street
Spencer, Indiana 47460
(Address of principle executive offices,
including Zip Code)
(812) 829-2095
(Registrant's telephone number, including area code)
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 report), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the Registrant's common stock, without par value,
outstanding as of May 1, 2000 was 862,900.
<PAGE>
Home Financial Bancorp
Form 10-Q
Index
Page No.
Forward Looking Statements 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statement of Financial
Condition as of March 31, 2000 and June 30, 1999
(Unaudited) 3
Consolidated Condensed Statement of Income for
the three months ended March
31, 2000 and 1999 (Unaudited) 4
Consolidated Condensed Statement of Income for the nine
months ended March 31, 2000 and 1999
(Unaudited) 5
Consolidated Condensed Statement of Shareholders' Equity
for the nine months ended March 31, 2000 and 1999
(Unaudited) 6
Consolidated Condensed Statement of Cash Flows for the
nine months ended March 31, 2000 and 1999
(Unaudited) 7
Notes to Consolidated Condensed Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
<PAGE>
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements which
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-Q and include statements regarding the intent, belief,
outlook, estimate or expectations of the Company (as defined below), its
directors or its officers primarily with respect to future events and the future
financial performance of the Company. Readers of this Form 10-Q are cautioned
that any such forward looking statements are not guarantees of future events or
performance and involve risks and uncertainties, and that actual results may
differ materially from those in the forward looking statements as a result of
various factors. The accompanying information contained in this Form 10-Q
identifies important factors that could cause such differences. These factors
include changes in interest rates; loss of deposits and loan demand to other
savings and financial institutions; substantial changes in financial markets;
changes in real estate values and the real estate market; regulatory changes; or
unanticipated results in pending legal proceedings.
<PAGE>
Home Financial Bancorp
and Wholly-owned Subsidiary
Owen Community Bank, s.b.
Consolidated Condensed Statement of Financial Condition
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash $ 386,955 $ 296,490
Short-term interest-bearing deposits 3,533,979 2,178,313
------------ ------------
Total cash and cash equivalents 3,920,934 2,474,803
Investment securities available for sale 7,781,197 8,288,028
Loans 43,793,685 38,573,918
Allowance for loan losses (356,793) (336,235)
------------ ------------
Net loans 43,436,892 38,237,683
Real estate acquired for development 427,622 20,433
Premises and equipment 1,856,817 1,984,842
Federal Home Loan Bank Stock 835,000 660,000
Interest receivable 325,789 318,241
Investment in limited partnership 668,167 695,780
Other assets 537,470 456,640
------------ ------------
Total assets $ 59,789,888 $ 53,136,450
============ ============
LIABILITIES
Deposits
Noninterest-bearing deposits $ 462,039 $ 578,267
Interest-bearing deposits 36,047,766 32,079,166
------------ ------------
Total deposits 36,509,805 32,657,433
Advances from Federal Home Loan Bank and
other borrowings 16,000,000 13,200,000
Other liabilities 268,750 155,794
------------ ------------
Total liabilities 52,778,555 46,013,227
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, without par value:
Authorized and unissued - 2,000,000 shares ---- ----
Common stock, without par value:
Authorized - 5,000,000 shares
Issued - 862,900 shares and 886,200 4,186,198 4,188,701
Retained earnings 3,606,812 3,613,425
Unearned Compensation RRP (148,600) (181,456)
Unearned ESOP shares (227,552) (257,908)
Accumulated other comprehensive loss (405,525) (239,539)
------------ ------------
Total shareholders' equity 7,011,333 7,123,223
------------ ------------
Total liabilities and shareholders' equity $ 59,789,888 $ 53,136,450
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
Home Financial Bancorp
and Wholly-owned Subsidiary
Owen Community Bank, s.b.
Consolidated Condensed Statement of Income
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Interest income
Loans $ 1,012,009 $ 823,635
Deposits with financial institutions 36,808 34,984
Investment securities 137,640 128,050
Federal Home Loan Bank stock 16,527 16,928
----------- -----------
Total interest income 1,202,984 1,003,597
----------- -----------
Interest expense
Deposits 422,211 316,520
Advances from Federal Home Loan Bank and
other borrowings 243,175 176,226
----------- -----------
Total interest expense 666,386 545,746
----------- -----------
Net interest income 537,598 457,851
Provision for losses on loans 15,000 7,916
----------- -----------
Net interest income after provision for losses on loans 522,598 449,935
----------- -----------
Other income
Service charges on deposit accounts 38,488 21,237
Gain on sale of real estate acquired for
development 20,391 ----
Net realized loss on sales of available for sale
securities (17,700) ----
Equity in loss of limited partnership (6,000) ----
Other income 3,244 7,792
----------- -----------
Total other income 38,423 29,029
----------- -----------
Other expenses
Salaries and employee benefits 234,041 209,679
Net occupancy expenses 36,807 30,636
Equipment expenses 41,903 27,968
Deposit insurance expense 1,844 4,064
Computer processing fees 47,301 28,649
Legal and accounting fees 34,843 31,945
Printing and supplies 9,719 11,676
Director and committee fees 14,250 14,250
Advertising expense 12,035 12,912
Other expenses 47,295 59,972
----------- -----------
Total noninterest expenses 480,038 431,751
----------- -----------
Income before income taxes 80,983 47,213
Income tax expense 12,667 19,901
----------- -----------
Net income $ 68,316 $ 27,312
=========== ===========
Basic and diluted net income per share $ .09 $ .03
Dividend per share $ .03 $ .03
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
Home Financial Bancorp
and Wholly-owned Subsidiary
Owen Community Bank, s.b.
Consolidated Condensed Statement of Income
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------------------
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Interest income
Loans $ 2,941,629 $ 2,475,051
Interest-bearing deposits 120,135 123,893
Investment securities 396,049 205,462
Other interest and dividend income 46,207 48,543
----------- -----------
Total interest income 3,504,020 2,852,949
----------- -----------
Interest expense
Deposits 1,228,210 1,063,189
Advances from Federal Home Loan Bank and
other borrowings 647,424 416,961
----------- -----------
Total interest expense 1,875,634 1,480,150
----------- -----------
Net interest income 1,628,386 1,372,799
Provision for losses on loans 39,000 31,916
----------- -----------
Net interest income after provision for losses on loans 1,589,386 1,340,883
----------- -----------
Other income
Service charges on deposit accounts 108,240 57,025
Gain on sale of real estate acquired for
development 26,135 6,148
Net realized gain (loss) on sales of available for sale
securities (17,700) 3,326
Equity in loss of limited partnership (27,613) --
Other income 30,816 28,982
----------- -----------
Total other income 119,878 95,481
----------- -----------
Other expenses
Salaries and employee benefits 677,425 611,093
Net occupancy expenses 108,022 83,119
Equipment expenses 130,706 67,225
Deposit insurance expense 11,131 11,833
Computer processing fees 135,220 77,736
Legal and accounting fees 96,228 83,363
Printing and supplies 33,745 55,262
Director and committee fees 42,750 42,200
Advertising expenses 28,641 51,154
Other expenses 168,212 187,499
----------- -----------
Total noninterest expenses 1,432,080 1,270,484
----------- -----------
Income before income taxes 277,184 165,880
Income tax expense 77,456 69,891
----------- -----------
Net income $ 199,728 $ 95,989
=========== ===========
Basic and diluted net income per share $ .25 $ .12
Dividend per share $ .09 $ .09
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
Home Financial Bancorp
and Wholly-owned Subsidiary
Owen Community Bank, s.b.
Form 10-Q
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
2000 1999
----------- -----------
(Unaudited)
Balance, July 1, 1999 and 1998 $ 7,123,223 $ 7,505,906
Net income 199,728 95,989
Common stock repurchased (151,414) (323,917)
Fair value adjustment of ESOP shares 21,566 5,607
ESOP shares earned 30,356 30,356
RRP shares earned 32,856 35,483
Net change in unrealized loss on securities (165,986) (135,931)
Cash dividends (78,996) (53,821)
----------- -----------
Balance, March 31 $ 7,011,333 $ 7,159,672
=========== ===========
See notes to consolidated condensed financial statements.
<PAGE>
Home Financial Bancorp
and Wholly-owned Subsidiary
Owen Community Bank, s.b.
Consolidated Condensed Statement of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------------------
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 199,728 $ 95,989
Adjustments to reconcile net income to net cash
Provided by operating activities:
Provision for loan losses 39,000 31,916
Depreciation 173,712 107,680
Investment securities (gain) loss 17,700 (3,326)
Gain on sale of real estate for development (26,135) --
Loss from operations of limited partnership 27,613 --
Change in interest receivable (7,548) (32,535)
Fair value adjustment of ESOP shares 21,566 5,607
Amortization of unearned ESOP shares 30,356 30,356
Amortization of unearned RRP shares 32,856 35,483
Other adjustments 153,347 118,187
------------ ------------
Net cash provided by operating activities 662,195 389,357
------------ ------------
INVESTING ACTIVITIES
Purchases of securities available for sale (825,278) (8,763,423)
Proceeds from sales of securities available for sale 76,909 565,389
Proceeds from maturities and repayments of investment
securities available for sale 950,938 640,032
Net changes in loans (5,238,209) (1,143,594)
Purchases of Federal Home Loan Bank of Indianapolis
Stock (175,000) (110,000)
Purchases of premises and equipment (45,687) (439,837)
Proceeds from real estate owned sales -- 221,229
Purchases of real estate for development (434,414) --
Proceeds from sale of real estate acquired for
development 53,359 8,037
Disbursements for low-income housing investment -- (685,780)
------------ ------------
Net cash used by investing activities (5,637,382) (9,707,947)
------------ ------------
FINANCING ACTIVITIES
Net change in:
NOW and savings accounts (1,089,154) 339,318
Certificates of deposit 4,941,526 4,280,165
Proceeds from Federal Home Loan Bank advances 12,000,000 6,000,000
Repayment of Federal Home Loan Bank advances (9,500,000) (2,000,000)
Proceeds from other borrowings 300,000 --
Purchase of stock (151,414) (323,917)
Cash dividends (79,640) (53,821)
------------ ------------
Net cash provided by financing activities 6,421,318 8,241,745
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
-----------------------------
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,446,131 (1,076,845)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,474,803 3,802,103
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,920,934 $ 2,725,258
=========== ===========
ADDITIONAL CASH FLOWS AND SUPPLEMENTARY INFORMATION
Interest paid $ 1,870,009 $ 1,480,150
Income tax paid 27,956 81,800
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
Home Financial Bancorp
and Wholly-owned Subsidiary
Owen Community Bank, s.b.
Notes to Consolidated Condensed Financial Statements
NOTE A: Basis of Presentation
The unaudited interim consolidated condensed financial statements include the
accounts of Home Financial Bancorp ("Company") and its subsidiary, Owen
Community Bank, s.b. ("Bank").
The unaudited interim consolidated condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and disclosures required by generally accepted
accounting principles for complete financial statements. The significant
accounting policies followed by the Company and Bank for interim financial
reporting are consistent with the accounting policies followed for annual
financial reporting. All adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary for a fair
presentation of the results for the periods reported, have been included in the
accompanying consolidated financial statements. The results of operations for
the nine months ended March 31, 2000 are not necessarily indicative of those
expected for the remainder of the year.
NOTE B: Earnings Per Share
Earnings per share (EPS) were computed as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 2000 1999
---------------------------------------- ---------------------------------------
Weighted Per Weighted Per
Net Average Share Net Average Share
Income Shares Amount Income Shares Amount
---------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share:
Income Available to
Common Stockholders $68,316 797,684 $ 0.09 $ 27,312 812,771 $ 0.03
============= =============
Effect of Dilutive Securities 0 0 0 491
--------------------------- --------------------------
Diluted Earnings Per Share:
Income Available to
Common Stockholders $ 68,316 797,684 $ 0.09 $ 27,312 813,262 $ 0.03
======================================== =======================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months Ended
March 31, 2000 1999
--------------------------------------- ---------------------------------------
Weighted Per Weighted Per
Net Average Share Net Average Share
Income Shares Amount Income Shares Amount
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share:
Income Available to
Common Stockholders $ 199,728 801,903 $ 0.25 $95,989 819,350 $ 0.12
============= =============
Effect of Dilutive Securities 0 131 0 567
-------------------------- --------------------------
Diluted Earnings Per Share:
Income Available to
Common Stockholders $ 199,728 802,034 $ 0.25 $95,989 819,917 $ 0.12
======================================= =======================================
</TABLE>
NOTE C: Other Comprehensive Income
<TABLE>
<CAPTION>
For the Nine Months Ended
March 31, 2000
-----------------------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount Benefit Amount
-----------------------------------------------
<S> <C> <C> <C>
Unrealized losses on securities:
Unrealized holding losses arising during the year $ (292,558) $ 115,883 $ (176,675)
Less: reclassification adjustment for losses realized in
net income (17,700) 7,011 (10,689)
Other comprehensive loss $ (274,858) $ 108,872 $ (165,986)
===============================================
For the Nine Months Ended
March 31, 1999
-----------------------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount Benefit Amount
-----------------------------------------------
Unrealized losses on securities:
Unrealized holding losses arising during the year $ (221,763) $ 87,841 $ (133,922)
Less: reclassification adjustment for gains realized in
net income 3,326 (1,317) 2,009
Other comprehensive loss $ (225,089) $ 89,158 $ (135,931)
===============================================
</TABLE>
<PAGE>
NOTE D: Subsequent Event
The Company's subsidiary Bank entered into a Partnership Agreement with Area Ten
Development, Inc., a wholly owned subsidiary of Area 10 Council on Aging of
Monroe and Owen Counties, Inc. to finance construction and development of Cunot
Apartments, L.P., a low-income senior housing project. Shortly after completion
of the project's construction, acceptable occupancy levels were reached and it
qualified for income tax credits. Beginning in November 1999, the Bank has
realized a reduction in federal taxes due to its investment in the Cunot
Apartments.
On April 25, 2000, the Cunot Apartments sustained severe fire damage to one of
three buildings in the 24-unit complex. No injuries were reported, but all eight
units in that building were damaged. Appropriate insurance coverage was in
effect at the time of the fire. At this time, the Company can not determine the
impact of this event on its financial position and results of operations, if
any.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
Home Financial Bancorp ("Company") is an Indiana corporation which was organized
in February 1996 to become a bank holding company upon its acquisition of all
the capital stock of Owen Community Bank, s.b. ("Bank") in connection with the
Bank's conversion from mutual to stock form. The Company became the Bank's
holding company at July 1, 1996.
The Bank has been, and continues to be, a community-oriented financial
institution offering selected financial services to meet the needs of the
communities it serves. The Bank attracts deposits from the general public and
historically has used such deposits, together with other funds, primarily to
originate one-to-four-family residential loans. The Bank also originates
commercial mortgage, consumer and, to a lesser extent, construction loans. The
Bank opened its first branch office in the Putman County Town of Coverdale,
Indiana on October 2, 1998. The Bank serves communities in Owen, Putnam and
surrounding counties through its main office located in Spencer, Indiana, and
its branch in Cloverdale, Indiana.
The Company's results of operations depend primarily upon the level of net
interest income, which is the difference between the interest income earned on
its interest-earning assets such as loans and investments, and the costs of the
Company's interest-bearing liabilities, primarily deposits and borrowings.
Results of operations are also dependent upon the level of the Company's
non-interest income, including fee income and service charges, and affected by
the level of its non-interest expenses, including its general and administrative
expenses.
BSF, Inc. ("BSF") is the wholly owned subsidiary of the Bank. BSF engages in
purchasing and developing large tracts of real estate. After land is purchased,
BSF subdivides the real estate into lots, makes improvements such as streets and
sells individual lots, usually on contract.
The Company's subsidiary Bank entered into a Partnership Agreement with Area Ten
Development, Inc., a wholly owned subsidiary of Area 10 Council on Aging of
Monroe and Owen Counties, Inc. to finance construction and development of Cunot
Apartments, L.P., a low-income senior housing project. The total cost of the
project was approximately $1.4 million. The Bank purchased its 99% limited
partnership interest for approximately $700,000.
<PAGE>
During the quarter ended December 31, 1999, the project achieved full occupancy
and satisfied requirements for income tax credits. Beginning in November 1999,
the Bank has realized a reduction in federal taxes due to its investment in the
Cunot Apartments. Income tax benefits for the quarter and nine months ended
March 31, 2000 were $21,000 and $35,000, respectively.
The Bank's investment in the project is eligible for income tax credits over the
fifteen-year life of the Agreement. Management has been advised that the Bank
will be able to utilize approximately $62,000 in low income tax credits during
fiscal year 2000, and between $82,000 and $93,000 annually thereafter. However,
in order to maximize the benefit of the tax credits the project must maintain an
acceptable occupancy rate and prove that it qualifies for the tax credits on an
annual basis. In addition, there are no assurances that changes in tax laws will
not affect the availability of low income tax credits in future years.
On April 25, 2000, the Cunot Apartments sustained severe fire damage to one of
three buildings in the 24-unit complex. No injuries were reported, but all eight
units in that building were damaged. Appropriate insurance coverage was in
effect at the time of the fire. At this time, the Company can not determine the
impact of this event on its financial position and results of operations, if
any.
Financial Condition
Total assets increased $6.7 million or 12.5%, to $59.8 million at March 31, 2000
compared to $53.1 million at June 30, 1999. Cash and short-term interest bearing
deposits totaled $3.9 million, a 58.4% increase. Investment securities totaled
$7.8 million at March 31, 2000. This is a decrease of $507,000 compared to June
30, 1999. Total loans increased $5.2 million, or 13.5%, during the past nine
months, to $43.8 million. Loan growth was funded primarily with deposit
increases and additional borrowings.
Real estate acquired for development increased from $20,000 to $428,000 during
the nine months ended March 31, 2000. This increase reflects the purchase and
improvement of land by the Bank's subsidiary service corporation, BSF, Inc., as
part of its estate development activities. During the third quarter, BSF sold
two lots of a recently developed 27-lot subdivision designed for modular homes.
Management expects the Bank to benefit from the subdivision through lot sales
and home financing opportunities.
At March 31, 2000, total deposits were $36.5 million, an increase of $3.9
million or 10.7% compared to levels reported nine months earlier. Total
borrowings increased $2.8 million or 21.2% to $16.0 million as of March 31,
2000.
Shareholders' equity was $7.0 million or 11.7% of total assets at March 31,
2000, compared to 13.4% of total assets as of June 30, 1999. The Company's book
value per share was $8.13 at March 31, 2000, based on 862,900 shares
outstanding. Factors impacting shareholders' equity during the quarter included
net income, a cash dividend, common stock repurchases, and a decrease in the
market value of securities available for sale.
During the first two quarters of fiscal year 2000, the Company purchased 9,800
shares of its common stock. An additional 13,500 shares of common stock
purchased and retired during the third quarter nearly complete the Company's
five-percent stock repurchase plan originally announced on September 8, 1998.
<PAGE>
Comparison of Operating Results for the Three-Month Periods Ended March 31, 2000
and 1999
Net income for the third fiscal quarter ended March 31, 2000 was $68,000, or
$.09 diluted earnings per common share. Net income for the same period last year
was $27,000, or $.03 diluted earnings per common share. Third quarter net income
was higher primarily due to an increase in net interest income. Net interest
income before the provision for loan losses was $538,000 for the three months
ended March 31, 2000, compared to $458,000 for the three months ended March 31,
1999.
Income tax credits related to the Bank's investment in Cunot Apartments, L.P., a
local low-income senior housing development, contributed $21,000 to the increase
in net income for the quarter. These tax credits resulted in a decline in the
effective combined federal and state income tax rate to approximately 16% for
the three months ended March 31, 2000, compared to approximately 42% for the
same period a year earlier.
Total noninterest income totaled $38,000, compared to $29,000 for the third
quarter last year; a 31.0% increase. Most of this increase can be traced to an
81.2% increase in income from service charges on deposit accounts. For the three
months ended March 31, 2000, income from service charges on deposit accounts
totaled $38,000. A $6,000 net operating loss was reported on the Bank's
investment in Cunot Apartments, L.P. Also during the third quarter, investment
securities sold to fund Company common stock repurchases generated an $18,000
loss. However, this amount was more than offset by the $20,000 gain on sale of
real estate acquired for development.
Total noninterest expense was $480,000 for the quarter ended March 31, 2000,
compared to $432,000 for the same period last year; an increase of 11.1%.
Continued overall Bank growth led to computer processing and equipment expense
increases of 65.1% and 49.8% respectively for the third quarter of fiscal year
2000 compared to the same period a year earlier.
Comparison of Operating Results for the Nine-Month Periods Ended March 31, 2000
and 1999
Fiscal year-to-date net income grew 108.1% to $200,000 or $.25 diluted earnings
per common share, compared to $96,000 or $.12 diluted earnings per common share
for the same period a year earlier. Net interest income before the provision for
loan losses was $1.6 million, compared to $1.4 million for the nine-month period
ended March 31, 1999. The increase in net interest income can be traced to a
higher average balance of mortgage-backed securities held during the more recent
nine-month period, and a larger loan portfolio compared to the same period in
fiscal year 1999.
Interest income from loans increased $467,000 or 18.9% to $2.9 million. This
increase is attributed to a higher volume of loans outstanding as well as upward
rate adjustments on a significant portion of the portfolio. At March 31, 2000,
loans with an adjustable rate feature comprised approximately 66% of total
loans. Fiscal year-to-date interest income from investment securities increased
to $396,000 compared to $205,000 for the nine months ended March 31, 1999.
Noninterest income totaled $120,000 for the first three quarters of fiscal 2000
compared to $95,000 for the same period a year earlier, a 26.3% increase. The
overall increase in noninterest income for the period was partially offset by
net operating losses on the Bank's low-income housing investment. For the
nine-month period ended March 31, 2000 net operating losses related to the
Bank's investemnt in Cunot Apartments, L.P. totaled $28,000. Service charges on
deposit accounts for the nine months ended March 31, 2000 increased by 89.5% to
$108,000, compared to $57,000 for the same period a year earlier. This increase
primarily resulted from an increase in the number of service fee producing
deposit accounts.
<PAGE>
Noninterest expense was $1.4 million for the nine months ended March 31, 2000,
compared to $1.3 million for the same period ended March 31, 1999. Compared to a
year earlier, equipment expense for the period nearly doubled to $131,000. This
increase was primarily due to new equipment purchases for the Cloverdale branch
office. Largely due to an increase in the number of loan and deposit accounts,
computer processing expenses increased 73.9% to $135,000 for the most recent
three quarter period. These increases are also partially attributed to Year 2000
computer compliance efforts. Salaries and employee benefits increased 10.9% to
$677,000. Overall, increases in several noninterest expense categories are
related to broad Company growth generally, and rapid growth at the Cloverdale
branch in particular.
Year-to-date income tax expense at the end of the third fiscal quarter of 2000
was $77,000, compared to $70,000 for the same period in fiscal year 1999. The
effective combined federal and state income tax rate for the first
three-quarters of the year was approximately 28%, compared to approximately 42%
for the same period a year earlier. The increased income tax was a consequence
of increased earnings this year versus the comparable period last year. The
increase in income tax for the current period was partially offset by income tax
credits recognized in the second and third quarter totaling $35,000.
Asset Quality
Management has established valuation allowances sufficient to absorb estimated
losses or exposure inherent in the Bank's asset structure. Adjustments to these
allowances reflect management's assessment of various risk factors which
include, but are not limited to changes in the type and volume of the lending
portfolio, level and trend of loan delinquencies, size of individual credit
exposure, and effectiveness of collection efforts. Loan loss provisions totaled
$39,000 for the nine months ended March 31, 2000 compared to $32,000 for the
same period a year earlier. At March 31, 2000, after net losses and recoveries,
the allowance for loan losses was $357,000 or 0.81% of total loans, compared to
$336,000 or 0.87% at June 30, 1999.
Management considered the allowance for loan losses at March 31, 2000, to be
adequate to cover estimated losses inherent in the loan portfolio at that date,
including probable losses that could be reasonably estimated. Such belief is
based upon an analysis of loans currently outstanding, past loss experience,
current economic conditions and other factors and estimates that are subject to
change and re-evaluation over time.
The following table compares activity in the allowance for loan losses for the
nine months ended March 31, 2000 and 1999.
Balance, July 1, 1999 $336,235 Balance, July 1, 1998 $319,595
Provision for loan losses 39,000 Provision for loan losses 31,916
Recoveries -- Recoveries 84
Loans charged off 18,442 Loans charged off 27,360
-------- --------
Balance, March 31, 2000 $356,793 Balance, March 31, 1999 $324,235
======== ========
Total non-performing loans were $227,000 or 0.52% of total loans at March 31,
2000 compared to $79,000 or 0.20% of total loans at June 30, 1999. Real estate
acquired through foreclosure totaled $6,000 at both March 31, 2000 and at June
30, 1999. No other repossessed assets existed at March 31, 2000 or at June 30,
1999. Total non-performing assets were $233,000 or .39% of assets at March 31,
2000.
<PAGE>
Liquidity and Capital Resources
The Company's most liquid assets are cash and interest bearing deposits. The
levels of these assets are dependent on the Company's operating, financing and
investing activities. At March 31, 2000 and June 30, 1999, cash and
interest-bearing deposits totaled $3.9 million and $2.5 million, respectively.
The Company's primary sources of funds include principal and interest payments
on loans, loan maturities, and repayments on investment securities. While
scheduled loan repayments and proceeds from investment securities are relatively
predictable, deposit flows and early repayments are more influenced by interest
rates, general economic conditions and competition. The Company attempts to
price its deposits to meet asset-liability objectives and local market
conditions.
If the Company requires funds beyond its ability to generate them internally, it
has the ability to borrow funds from the FHLB of Indianapolis. Federal law
limits an institution's borrowings from the FHLB to 20 times the amount paid for
capital stock in the FHLB, subject to regulatory capital requirements. As a
policy matter, however, the FHLB of Indianapolis typically limits the amount of
borrowings from the FHLB to 50% of adjusted assets (total assets less
borrowings). Based on the percentage of Company assets classified as "qualified
investments" excess borrowing capacity was approximately $4.9 million at the end
of the third quarter. However, under limits adopted by Board resolution of the
subsidiary Bank, the Company had $3.3 million of unused credit available from
the FHLB. At March 31, 2000, borrowing from the FHLB totaled $15.7 million, a
$2.5 million increase from nine months earlier.
At March 31, 2000, borrowings other than FHLB advances totaled $300,000. The
Bank's service corporation, BSF, Inc., borrowed these funds for purposes of
purchasing and making improvements to a large tract of land as part of its real
estate development operations.
Shareholders' equity was $7.0 million or 11.7% of total assets at March 31,
2000, compared to $7.1 million and 13.4% of total assets at June 30, 1999. Book
value at March 31, 2000 was $8.13 per share based on 862,900 outstanding shares.
Book value per common share at June 30, 1999 was $8.04. All regulatory capital
requirements for the Bank are currently met. Although the real estate
development operations of the Bank's subsidiary are permissible activities under
the Bank's federal thrift charter, the OTS requires that the Bank deduct its
investment in the subsidiary from its capital for purposes of calculating
regulatory capital amounts and ratios.
The Bank's actual and required capital amounts (in thousands) and ratios were as
follows as of March 31, 2000.
<TABLE>
<CAPTION>
Required For Adequate Required To Be Well
Actual Capital* Capitalized*
----------- ---------- ----------- ----------- ----------- ----------
Amount Ratio Amount Ratio Amount Ratio
----------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total capital *(to risk weighted assets) $6,636 18.8% $2,831 8.0% $3,540 10.0%
Tier 1 capital *(to risk weighted assets) 6,279 17.7% 1,416 4.0% 2,124 6.0%
Tier 1 capital *(to total assets) 6,279 10.7% 2,357 4.0% 2,946 5.0%
</TABLE>
*As defined by the regulatory agencies
<PAGE>
Effect of Inflation and Changing Prices
The Company's asset and liability structure is substantially different from that
of an industrial company in that most of its assets and liabilities are monetary
in nature. Management believes the impact of inflation on financial results
depends upon the Company's ability to react to changes in interest rates and, by
such reaction, reduce the inflationary impact on performance. Interest rates do
not necessarily move in the same direction at the same time, or at the same
magnitude, as the prices of other goods and services. Management relies on its
ability to manage the relationship between interest-sensitive assets and
liabilities to protect against wide interest rate fluctuations, including those
resulting from inflation.
Item 3: Quantitative and Qualitative Disclosures About Market Risk.
Asset/Liability Management
The Bank's profitability is dependent to a large extent upon its net interest
income, which is the difference between its interest income on interest-earning
assets, such as loans and securities, and its interest expense on
interest-bearing liabilities, such as deposits and borrowings. The Bank, like
other financial institutions, is subject to interest rate risk to the degree
that its interest-earning assets reprice differently than its interest-bearing
liabilities. The Bank manages its mix of assets and liabilities with the goals
of limiting its exposure to interest rate risk, ensuring adequate liquidity, and
coordinating its sources and uses of funds.
Management seeks to control the Bank's interest rate risk exposure in a manner
that will allow for adequate levels of earnings and capital over a range of
possible interest rate environments. Management has adopted formal policies and
practices to monitor and manage interest rate risk exposure. As part of this
effort, management uses the market value ("MV") methodology to gauge interest
rate risk exposure.
Generally, MV is the discounted present value of the difference between incoming
cash flows on interest-earning assets and other assets and outgoing cash flows
on interest-bearing liabilities and other liabilities. The application of this
methodology attempts to quantify interest rate risk as the change in the MV
which would result from a theoretical 200 and 400 basis point (1 basis point
equals .01%) change in market interest rates. Both 200 and 400 basis point
increases in market interest rates and 200 and 400 basis point decreases in
market interest rates are considered.
At December 31, 1999, the most recent available analysis of the subsidiary
Bank's interest rate risk position, it was estimated that the Bank's MV would
decrease 20.2% and 45.1% in the event of 200 and 400 basis point increases in
market interest rates respectively, compared to MV decreases of 6.1% and 22.3%
for the same rate increases at December 31, 1998. The Bank's MV at December 31,
1999 would increase 3.3% and decrease by 3.5% in the event of 200 and 400 basis
point decreases in market rates respectively. A year earlier, 200 and 400 basis
point decreases in market rates would have decreased MV 10.3% and 17.0%
respectively.
<PAGE>
Presented below, as of December 31, 1999 and 1998, is an analysis of the Bank's
interest rate risk as measured by changes in MV for instantaneous and sustained
parallel shifts of 200 and 400 basis point increments in market rates.
December 31, 1999
Market Value Summary Performance
MV as % of
Present Value (PV)
Change Market Value of Assets
In Rates $ Amount $ Change % Change MV Ratio Change
-------- -------- -------- -------- -------- ------
(Dollars in thousands)
+400 bp* $3,360 $(2,757) (45.07)% 6.67% (433) bp
+200 bp 4,884 (1,234) (20.17) 9.19 (181) bp
0 bp 6,117 0 0.00 11.00
-200 bp 6,319 201 3.29 11.06 6 bp
-400 bp 5,906 (211) (3.45) 10.19 (81) bp
*Basis Points.
Interest Rate Risk Measures: 200 Basis Point Rate Shock
Pre-Shock MV Ratio: MV as % of PV of Assets 11.00%
Exposure Measure: Post-Shock MV Ratio 9.19%
Sensitivity Measure: Change in MV Ratio 181 bp
December 31, 1998
Market Value Summary Performance
MV as % of
Present Value (PV)
Change Market Value of Assets
In Rates $ Amount $ Change % Change MV Ratio Change
-------- -------- -------- -------- -------- ------
(Dollars in thousands)
+400 bp* $5,014 $(1,442) (22.33)% 10.57% (201) bp
+200 bp 6,065 (391) (6.06) 12.21 (37) bp
0 bp 6,456 0 0.00 12.58
-200 bp 5,794 (662) (10.26) 11.15 (143) bp
-400 bp 5,361 (1,094) (16.95) 10.16 (242) bp
*Basis Points.
Interest Rate Risk Measures: 200 Basis Point Rate Shock
Pre-Shock MV Ratio: MV as % of PV of Assets 12.58%
Exposure Measure: Post-Shock MV Ratio 11.15%
Sensitivity Measure: Change in MV Ratio 143 bp
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3(1). The Articles of Incorporation of the Registrant are
incorporated by reference to Exhibit 3(1) to the Registration
Statement on Form S-1 (Registration No. 333-1746).
3(2). By-Laws of the Registrant are incorporated by reference to
Exhibit 3(2) to the Report on Form 10-Q for the period ended
March 31, 1997.
27. Financial Data Schedule (filed electronically).
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the period
ended March 31, 2000.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOME FINANCIAL BANCORP
Date: May 12, 2000 By:/s/ Kurt J. Meier
----------------------------
Kurt J. Meier
President and
Chief Executive Officer
Date: May 12, 2000 By:/s/ Kurt D. Rosenberger
----------------------------
Kurt D. Rosenberger
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001009242
<NAME> Home Financial Bancorp
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-1-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.000
<CASH> 387
<INT-BEARING-DEPOSITS> 3,534
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,781
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 43,794
<ALLOWANCE> 357
<TOTAL-ASSETS> 59,790
<DEPOSITS> 36,510
<SHORT-TERM> 6,500
<LIABILITIES-OTHER> 269
<LONG-TERM> 9,500
0
0
<COMMON> 4,186
<OTHER-SE> 2,825
<TOTAL-LIABILITIES-AND-EQUITY> 59,790
<INTEREST-LOAN> 2,942
<INTEREST-INVEST> 442
<INTEREST-OTHER> 120
<INTEREST-TOTAL> 3,504
<INTEREST-DEPOSIT> 1,228
<INTEREST-EXPENSE> 1,876
<INTEREST-INCOME-NET> 1,628
<LOAN-LOSSES> 39
<SECURITIES-GAINS> (17,700)
<EXPENSE-OTHER> 1,432
<INCOME-PRETAX> 277
<INCOME-PRE-EXTRAORDINARY> 277
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 4.3
<LOANS-NON> 227
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 336
<CHARGE-OFFS> 18
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 357
<ALLOWANCE-DOMESTIC> 357
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
