SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 principal 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 November 1, 2000 was 849,100.
<PAGE>
Home Financial Bancorp
Form 10-QSB
Index
Page No.
Forward Looking Statements 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statement of Financial
Condition as of September 30, 2000 and
June 30, 2000 (Unaudited) 3
Consolidated Condensed Statement of Income
for the three months ended September 30, 2000
and 1999 (Unaudited) 4
Consolidated Condensed Statement of Shareholders'
Equity for the three months ended September 30, 2000
and 1999 (Unaudited) 5
Consolidated Condensed Statement of Cash Flows for
the three months ended September 30, 2000 and 1999
(Unaudited) 6
Notes to Consolidated Condensed Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
<PAGE>
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB ("Form 10-QSB") 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-QSB 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-QSB 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-QSB
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>
<TABLE>
<CAPTION>
HOME FINANCIAL BANCORP
AND WHOLLY-OWNED SUBSIDIARY
OWEN COMMUNITY BANK, s.b.
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL CONDITION
September 30, June 30,
2000 2000
------------ -----------
(Unaudited)
ASSETS
<S> <C> <C>
Cash $ 508,859 $ 500,970
Short-term interest-bearing deposits 1,574,763 1,214,840
------------- -------------
Total cash and cash equivalents 2,083,622 1,715,810
Investment securities available for sale 7,718,297 7,712,073
Loans 49,108,868 45,712,381
Allowance for loan losses (386,793) (371,793)
------------- -------------
Net loans 48,722,075 45,340,588
Real estate acquired for development 467,985 440,020
Premises and equipment 1,946,571 1,920,452
Federal Home Loan Bank Stock 835,000 835,000
Interest receivable 356,319 337,267
Investment in limited partnership 656,167 662,167
Other assets 509,166 487,320
------------- -------------
Total assets $ 63,295,202 $ 59,450,697
============= =============
LIABILITIES
Deposits
Noninterest-bearing deposits $ 683,633 $ 663,747
Interest-bearing deposits 38,823,508 37,877,763
-------------- -------------
Total deposits 39,507,141 38,541,510
Advances from Federal Home Loan Bank and
other borrowings 16,250,000 13,500,000
Other liabilities 220,842 226,713
-------------- -------------
Total liabilities 55,977,983 52,268,223
-------------- -------------
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 - 849,100 shares and 857,400 4,016,183 4,055,732
Retained earnings 3,878,661 3,828,322
Unearned Compensation RRP (124,907) (137,381)
Unearned ESOP shares (203,134) (213,854)
Accumulated other comprehensive loss (249,584) (350,345)
-------------- -------------
Total shareholders' equity 7,317,219 7,182,474
--------------- -------------
Total liabilities and shareholders' equity $ 63,295,202 $ 59,450,697
=============== =============
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
HOME FINANCIAL BANCORP
AND WHOLLY-OWNED SUBSIDIARY
OWEN COMMUNITY BANK, s.b.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
Three Months Ended
September 30,
------------- -------------
2000 1999
------------- -------------
(Unaudited)
<S> <C> <C>
Interest income
Loans $ 1,174,348 $ 934,819
Deposits with financial institutions 17,327 50,735
Investment securities 129,458 121,142
Federal Home Loan Bank stock 17,841 14,722
-------------- -----------
Total interest income 1,338,974 1,121,418
-------------- ------------
Interest expense
Deposits 516,421 397,776
Federal Home Loan Bank advances and
other borrowings 217,029 206,383
-------------- -----------
Total interest expense 733,450 604,159
-------------- -----------
Net interest income 605,524 517,259
Provision for losses on loans 15,000 12,000
-------------- -----------
Net interest income after provision
for losses on loans 590,524 505,259
-------------- -----------
Other income
Service charges on deposit accounts 41,758 35,907
Gain on sale of real estate acquired for
development 29,911 6,285
Net realized loss on sales of available
for sale securities (115) ---
Equity in loss of limited partnership (6,000) ---
Other income 4,254 6,565
-------------- -----------
Total other income 69,808 48,757
-------------- -----------
Other expenses
Salaries and employee benefits 271,361 225,700
Net occupancy expenses 40,239 33,325
Equipment expenses 27,968 45,027
Deposit insurance expense 1,863 4,486
Computer processing fees 59,832 44,024
Printing and office supplies 8,583 11,482
Legal and accounting fees 40,442 18,372
Director and committee fees 15,250 14,250
Advertising expense 17,523 7,821
Other expenses 60,210 54,425
-------------- ------------
Total noninterest expenses 543,271 458,912
-------------- ------------
Income before income taxes 117,061 95,104
Income tax expense 29,242 37,383
-------------- ------------
Net income $ 87,819 $ 57,721
============== ============
Basic and diluted net income per share $ .11 $ .07
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 SHAREHOLDERS' EQUITY
2000 1999
---- ----
(Unaudited)
Balance, July 1 $7,182,474 $7,123,223
Net income 87,819 57,721
Common stock repurchased (47,702) (49,332)
Fair value adjustment of ESOP shares 5,189 8,913
ESOP shares earned 10,720 10,119
RRP shares earned 12,474 11,230
Cash dividends (34,516) (26,586)
Net change in unrealized gain on securities
available for sale 100,761 (57,239)
---------- ----------
Balance, September 30 $7,317,219 $7,078,049
========== ==========
See notes to consolidated condensed financial statements.
<PAGE>
HOME FINANCIAL BANCORP
AND WHOLLY-OWNED SUBSDIDIARY
OWEN COMMUNITY BANK, s.b.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------- -------------
2000 1999
------------- -------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 87,819 $ 57,721
Adjustments to reconcile net income to net cash
Provided by operating activities:
Provision for loan losses 15,000 12,000
Depreciation 40,554 59,800
Investment securities loss 115 - - -
Gain on sale of foreclosed assets (7,242) - - -
Gain on sale of real estate acquired for development (29,911) (6,285)
Loss from operations of limited partnership 6,000 - - -
Change in interest receivable (19,052) (2,997)
Fair value adjustment of ESOP shares 5,189 8,913
Amortization of unearned ESOP shares 10,720 10,119
Amortization of unearned RRP shares 12,474 11,230
Other adjustments (79,719) 129,626
------------ -------------
Net cash provided by operating activities 41,947 280,127
------------ -------------
INVESTING ACTIVITIES
Purchases of securities available for sale (142,219) - - -
Proceeds from sales of securities available for sale 56,088 - - -
Purchases of Federal Home Loan Bank stock - - - (75,000)
Proceeds from maturities and repayments of investment
securities available for sale 242,067 459,306
Net changes in loans (3,389,786) (1,436,863)
Purchases of premises and equipment (66,673) (9,313)
Proceeds from sale of foreclosed assets 87,400 - - -
Purchases of real estate for development (103,054) (347,650)
Proceeds from sale of real estate acquired for
development - - - 12,000
----------- -------------
Net cash used by investing activities (3,316,177) (1,397,520)
----------- -------------
FINANCING ACTIVITIES
Net change in:
NOW and savings accounts 791,499 (276,026)
Certificates of deposit 174,132 2,746,491
Proceeds from Federal Home Loan Bank advances 5,000,000 2,500,000
Repayment of Federal Home Loan Bank advances (2,500,000) (1,000,000)
Proceeds from other borrowings 464,419 280,000
Repayment of other borrowings (214,419) - - -
Purchase of stock (47,702) (49,332)
Cash dividends (25,887) (26,586)
------------ -------------
Net cash provided by financing activities 3,642,042 4,174,547
------------ -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------- -----------
2000 1999
------------- -----------
(Unaudited)
<S> <C> <C>
NET CHANGE IN CASH AND CASH EQUIVALENTS 367,812 3,057,154
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,715,810 2,474,803
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,083,622 $ 5,531,957
============ =============
ADDITIONAL CASH FLOWS AND SUPPLEMENTARY INFORMATION
Interest paid $ 733,449 $ 604,159
Income tax paid 32,668 41,654
</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-QSB 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 three months ended September 30, 2000 are not necessarily indicative of
those expected for the remainder of the year.
NOTE B: Earnings Per Share
<TABLE>
<CAPTION>
Earnings per share (EPS) were computed as follows:
For the Three Months Ended
September 30, 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 $87,819 787,584 $ 0.11 $57,721 811,084 $ 0.07
======= =======
Effect of Dilutive Securities 0 0 0 515
------- ------- ------- -------
Diluted Earnings Per Share:
Income Available to
Common Stockholders $ 87,819 787,584 $ 0.11 57,721 811,599 $ 0.07
========== ======= ======= ======== ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOTE C: Other Comprehensive Income
2000
Tax
For the Three Months Ended Before-Tax (Expense) Net-of-Tax
September 30 Amount Benefit Amount
Unrealized gains on securities:
<S> <C> <C> <C>
Unrealized holding gains arising during the year $ 166,735 $ (66,043) $ 100,692
Less: reclassification adjustment for losses realized in
net income (115) 46 (69)
---------- --------- ---------
Other comprehensive income $ 166,850 $ (66,089) $ 100,761
========== ========= =========
1999
Tax
For the Three Months Ended Before-Tax (Expense) Net-of-Tax
September 30 Amount Benefit Amount
Unrealized losses on securities:
Unrealized holding losses arising during the year $ (94,787) $ 37,548 $ (57,239)
Less: reclassification adjustment for gains (losses)
realized in net income -- -- --
---------- --------- ---------
Other comprehensive loss $ (94,787) $ 37,548 $ (57,239)
========== ========= =========
</TABLE>
<PAGE>
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 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 that 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 housing project. The total construction and
development cost of the project was approximately $1.4 million. The Bank
purchased a 99% limited partnership interest for approximately $700,000.
During the quarter, the Bank recorded $6,000 as its share of net operating
losses from the project, reducing its net investment to $656,000 at September
30, 2000. Management has been advised that reconstruction of an eight-unit
apartment building damaged in an April 25, 2000 fire is nearly completed and may
be occupied again in January 2001. Income tax credits related to this investment
reduced the Company's first quarter federal income tax expense by $24,000.
The Bank's investment in the project is eligible for income tax credits over the
fifteen-year life of the Agreement. Management estimates that the Bank will be
able to utilize approximately $107,000 in low income tax credits annually.
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.
<PAGE>
Financial Condition
Total assets increased 6.5%, to $63.3 million at September 30, 2000 compared to
$59.5 million at June 30, 2000. Cash and short-term interest bearing deposits
totaled $2.1 million; an increase of $368,000. Investment securities totaled
$7.7 million at September 30 and June 30, 2000. During the three months ended
September 30, 2000, total loans increased $3.4 million, or 7.4% to $49.1
million.
Deposits at September 30, 2000 were $39.5 million; an increase of $966,000 or
2.5% compared to three months earlier. Total borrowings increased $2.8 million
to $16.3 million as of September 30, 2000.
Shareholders' equity was $7.3 million and 11.6% of total assets as of September
30, 2000, compared to $7.2 million and 12.1% of total assets as of June 30,
2000. Pursuant to a repurchase plan announced May 25, 2000, the Company
purchased and retired 8,300 shares of common stock during fiscal first quarter
2001. The Company's net book value at September 30, 2000 was $8.62 per share
based on 849,100 shares outstanding. Factors impacting shareholders' equity
during the quarter included net income, a cash dividend, common stock
repurchases, and a net increase in the market value of securities available for
sale.
Comparison of Operating Results for the Three-Month Periods Ended September 30,
2000 and 1999
Net income for the first fiscal quarter ended September 30, 2000 increased 51.7%
compared to the same period in 1999. Net income was $88,000, or $.11 per share
based on an average of 787,584 basic and diluted shares outstanding. Net income
for the same period last year was $58,000, or $.07 per share based on an average
of 811,084 basic, and 811,599 diluted shares outstanding. Net income for the
quarter was higher due to an increase in net interest income, increased gain
from the sale of real estate acquired for development and lower income tax
expense.
Interest income increased by $218,000 or 19.4%, to $1.3 million for the first
quarter of fiscal year 2001 compared to the first quarter of fiscal year 2000.
This increase was partially offset by an increase in interest expense of
$129,000 or 21.4%. Net interest income before the provision for loan losses was
$606,000 for the three months ended September 30, 2000 compared to $517,000 for
the 1999 period, an increase of 17.2%.
Non-interest income increased $21,000 or 42.9% compared to a year earlier
primarily due to profit of $30,000 from the sale of real estate acquired for
development. A net operating loss on the Bank's interest in the Cunot
Apartments, L. P. partially offset the overall increase in non-interest income.
Non-interest expense increased 18.3% to $543,000 for the quarter ended September
30, 2000, compared to $459,000 for the same period a year earlier. The bulk of
this increase can be traced to salaries and employee benefits, computer
processing fees, and advertising expense. Compared to the same three-month
period in 1999, salaries and employee benefit expense increased 20.2% to
$271,000, computer processing fees increased 35.9% to $60,000, and advertising
expense more than doubled to $18,000. However, the overall increase in
non-interest expense was partially offset by a 37.9% decrease in equipment
expense to $28,000.
Income tax credits related to the Bank's investment in Cunot Apartments, L.P.
contributed $24,000 to the increase in net income for the quarter. Income tax
expense for the first fiscal quarter of 2001 was $29,000, compared to $37,000
for the first fiscal quarter of 2000.
<PAGE>
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 were
$15,000 for the quarter ended September 30, 2000 and $12,000 for the quarter
ended September 30, 1999. At September 30, 2000, after net losses and
recoveries, the allowance for loan losses was $387,000 or 0.79% of total loans,
compared to $372,000 or 0.81% at June 30, 2000.
Management considered the allowance for loan losses at September 30, 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 sets forth the changes affecting the allowance for loan
losses for the three months ended September 30, 2000 and September 30, 1999:
Balance, July 1, 2000 $371,793 Balance, July 1, 1999 $336,235
Provision for loan losses 15,000 Provision for loan losses 12,000
Recoveries -- Recoveries --
Loans charged off -- Loans charged off 5,472
-------- --------
Balance, September 30, 2000 $386,793 Balance, September 30, 1999 $342,763
======== ========
Total non-performing loans were $643,000 or 1.3% of total loans at September 30,
2000 compared to $395,000 or 0.9% of total loans at June 30, 2000. Real estate
acquired through foreclosure totaled $53,000 at September 30, 2000, compared to
$35,000 at June 30, 2000. No other repossessed assets existed at September 30,
2000 or June 30, 2000. Total non-performing assets were $696,000 or 1.1% of
assets at September 30, 2000.
At September 30, 2000, unrealized market loss on equity securities available for
sale was $198,000. A deferred tax asset of $78,000 relates to unrealized tax
benefits associated with these below-market securities. In future periods, the
Company may need to establish a valuation allowance for any deferred tax asset
amount associated with below-market equity securities if it is more likely than
not that the deferred tax asset will not be realized. The establishment of this
valuation allowance would increase income tax expense and lower net income.
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 September 30, 2000 and June 30, 2000, cash and
interest-bearing deposits totaled $2.1 million and $1.7 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.
<PAGE>
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 $7.0 million at the end
of the first 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 September 30, 2000, borrowing from the FHLB totaled $15.7 million.
At September 30, 2000, borrowings other than FHLB advances totaled $550,000. The
Bank's service corporation, BSF, Inc., borrowed $400,000 for purposes of
purchasing land for use in its real estate development operations. A line of
credit balance of $150,000 outstanding at quarter-end funded certain holding
company activities.
Shareholders' equity was $7.3 million or 11.6% of total assets at September 30,
2000, compared to $7.2 million or 12.1% of total assets at June 30, 2000. Book
value at September 30, 2000 was $8.62 per share based on 849,100 outstanding
shares. All regulatory capital requirements for the Bank were met as of
September 30, 2000. Although the real estate development operations of the
Bank's subsidiary are permissible activities under the Bank's current 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 September 30, 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) $6,869 17.7% $3,105 8.0% $3,881 10.0%
Tier 1 capital *(to risk weighted assets) 6,482 16.7% 1,552 4.0% 2,328 6.0%
Tier 1 capital *(to total assets) 6,482 10.5% 2,484 4.0% 3,105 5.0%
</TABLE>
*As defined by the regulatory agencies
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.
<PAGE>
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 re-price 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 September 30, 2000, it was estimated that the Bank's MV would decrease 30.5%
and 67.7% in the event of 200 and 400 basis point increases in market interest
rates respectively, compared to 19.0% and 42.7% for the same increases at
September 30, 1999. The Bank's MV at September 30, 2000 would increase 4.2% and
2.4% 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 1.0% and 4.5% respectively.
<PAGE>
Presented below, as of September 30, 2000 and 1999, 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.
September 30, 2000
Market Value Summary Performance
<TABLE>
<CAPTION>
MV as % of
Present Value (PV)
Change Market Value of Assets
In Rates $ Amount $ Change % Change MV Ratio Change
-------- -------- -------- -------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
+400 bp* $2,225 $(4,654) (67.66)% 4.03% (705) bp
+200 bp 4,781 (2,098) (30.50) 8.13 (295) bp
0 bp 6,879 0 0.00 11.08 ----
-200 bp 7,169 290 4.22 11.28 20 bp
-400 bp 7,047 168 2.44 10.92 (16) bp
*Basis Points.
</TABLE>
Interest Rate Risk Measures: 200 Basis Point Rate Shock
Pre-Shock MV Ratio: MV as % of PV of Assets 11.08%
Exposure Measure: Post-Shock MV Ratio 8.13%
Sensitivity Measure: Change in MV Ratio 295 bp
September 30, 1999
Market Value Summary Performance
<TABLE>
<CAPTION>
MV as % of
Present Value (PV)
Change Market Value of Assets
In Rates $ Amount $ Change % Change MV Ratio Change
-------- -------- -------- -------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
+400 bp* $3,879 $(2,890) (42.70)% 7.48% (444) bp
+200 bp 5,484 (1,285) (18.98) 10.07 (185) bp
0 bp 6,769 0 0.00 11.92 ----
-200 bp 6,703 (66) (0.97) 11.59 (33) bp
-400 bp 6,464 (305) (4.51) 11.04 (88) bp
*Basis Points.
</TABLE>
Interest Rate Risk Measures: 200 Basis Point Rate Shock
Pre-Shock MV Ratio: MV as % of PV of Assets 11.92%
Exposure Measure: Post-Shock MV Ratio 10.07%
Sensitivity Measure: Change in MV Ratio 185 bp
Management believes that the MV methodology overcomes three shortcomings of the
typical maturity gap methodology. First, it does not use arbitrary repricing
intervals and accounts for all expected future cash flows; weighing each by its
appropriate discount factor. Second, because the MV method projects cash flows
of each financial instrument under different interest-rate environments, it can
incorporate the effect of embedded options on an institution's interest rate
risk exposure. Third, it allows interest rates on different instruments to
change by varying amounts in response to a change in market interest rates,
resulting in more accurate estimates of cash flows.
<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.
On October 10, 2000, the Company held its fifth annual meeting of shareholders
at which time matters submitted to a vote of stockholders included an election
of three Company directors, and ratification of the appointment of Olive LLP as
auditors for the fiscal year ending June 30, 2001.
All three director nominees were elected, and the appointment of auditors was
also approved and ratified by a majority of 852,100 issued and outstanding share
votes. A tabulation of votes cast as to each matter submitted to stockholders is
presented below:
Director Nominees For Against Abstain Non-Vote
----------------- --- ------- ------- --------
John T. Gillaspy - 3 years 686,382 14,772 - 150,946
Gary M. Monnett - 3 years 676,182 24,972 - 150,946
Robert W. Raper - 3 years 686,062 15,092 - 150,946
Other Matters
Auditors 686,382 13,450 1,322 150,946
The other directors continuing in office after the annual meeting are Charles W.
Chambers, Kurt J. Meier, Stephen Parrish, Kurt D.
Rosenberger, Frank R. Stewart and Tad Wilson.
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-QSB 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 September
30, 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: November 13, 2000 By:/s/Kurt J. Meier
-----------------------
Kurt J. Meier
President and
Chief Executive Officer
Date: November 13, 2000 By:/s/Kurt D. Roseberger
-----------------------
Kurt D. Rosenberger
Vice President and
Chief Financial Officer
