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 June 30, 1996
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 0-28696
HOME BANCORP OF ELGIN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-4090333
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
16 NORTH SPRING STREET, ELGIN, ILLINOIS 60120
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(847) 742-3800
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed from last Report)
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 twelve 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 the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Outstanding at
Class June 30, 1996
----- -------------
Common Stock, None
par value $.01
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TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements of Home Federal Savings and Loan
Association of Elgin.................................................1
Balance Sheets (Unaudited) -- June 30, 1996
and December 31, 1995.................................................1
Statements of Earnings (Unaudited) -- Three and six months
ended June 30, 1996 and 1995.......... ..............................2
Statements of Cash Flows (Unaudited) -- Three and six months
ended June 30, 1996 and 1995.........................................3
Notes to Unaudited Financial Statements...............................4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 6
PART II -- OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings................................................... 11
Item 2. Changes in Securities............................................... 11
Item 3. Defaults upon Senior Securities..................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................. 11
Item 5. Other Information................................................... 11
Item 6. Exhibits and Reports on Form 8-K.................................... 11
Signatures
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PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS -- AT JUNE 30, 1996, THE COMPANY HAD NOT YET ISSUED
ANY STOCK, HAD NO ASSETS AND NO LIABILITIES AND HAD NOT CONDUCTED ANY BUSINESS
OTHER THAN OF AN ORGANIZATIONAL NATURE. UPON THE CLOSING OF THE CONVERSION OF
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN ("HOME FEDERAL") DESCRIBED IN
NOTE 2 HEREOF, THE COMPANY WILL OWN ALL OF THE ISSUED AND OUTSTANDING CAPITAL
STOCK OF HOME FEDERAL. ACCORDINGLY, THE FINANCIAL STATEMENTS OF HOME FEDERAL ARE
PRESENTED HEREIN.
<TABLE>
<CAPTION>
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
BALANCE SHEETS
(UNAUDITED)
JUNE 30, DECEMBER 31,
1996 1995
--------------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks............................................. $ 10,366 $ 10,021
Interest-earning deposits........................................... 7,610 8,588
Investment securities held-to-maturity ............................. 5,963 5,948
Loans receivable, net .............................................. 263,892 267,153
Government National Mortgage Association
mortgage-backed securities held-to-maturity....................... 160 187
Accrued interest receivable......................................... 1,498 1,484
Real estate owned and in judgment, at lower of cost or fair value
net of allowance for losses of $20,000
at June 30, 1996 and December 31, 1995)............................ 331 496
Federal Home Loan Bank of Chicago stock, at cost.................... 2,678 3,056
Office properties and equipment, net................................ 6,753 6,817
Prepaid expenses and other assets................................... 1,146 770
--------------- ---------------
Total assets..................................................... 300,397 304,520
=============== ===============
LIABILITIES AND RETAINED EARNINGS
Savings deposits ................................................. $ 258,622 $ 259,972
Borrowed funds ................................................... 4,000
Advance payments by borrowers for taxes and insurance............. 1,959 1,860
Accrued interest payable and other liabilities.................... 2,632 2,006
---------------- ---------------
Total liabilities............................................. 263,213 267,838
---------------- ---------------
Retained earnings - substantially restricted ....................... 37,184 36,683
Total liabilities and retained earnings........................ 300,397 304,520
=============== ===============
</TABLE>
See accompanying notes to the unaudited financial statements.
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<TABLE>
<CAPTION>
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
STATEMENTS OF EARNINGS
(UNAUDITED)
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- ----------------------------
1996 1995 1996 1995
--------------- ------------ ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans secured by real estate............................ $ 5,242 $ 5,452 $ 10,553 $ 10,914
Other loans............................................. 13 14 28 29
Mortgage-backed securities held to maturity............. 3 4 6 8
Investment securities held to maturity.................. 90 90 180 180
Interest-earning deposits............................... 185 183 346 313
FHLB of Chicago stock................................... 45 50 94 96
---------- ---------- ---------- ----------
Total interest income................................ 5,578 5,793 11,207 11,540
INTEREST EXPENSE
Savings deposits........................................ 2,713 2,701 5,449 5,249
Borrowed funds.......................................... -- -- 37 --
---------- ------------------------- ----------
Total interest expense............................... 2,713 2,701 5,486 5,249
---------- ---------- ---------- ----------
Net interest income before provisions for loan losses... 2,865 3,092 5,721 6,291
Provision for loan losses............................... 30 45 60 90
---------- --------- ---------- ----------
Net interest income after provision for loan losses..... 2,835 3,047 5,661 6,201
---------- ---------- ---------- ----------
NON-INTEREST INCOME
Service fee income...................................... 300 268 594 533
Gain on sale of real estate owned....................... 3 -- 21 --
Gain on sale of office properties and equipment......... -- -- 1 --
Other income............................................ 6 5 11 9
---------- ---------- ---------- ----------
Total noninterest income.............................. 309 273 627 542
NONINTEREST EXPENSE:
Compensation and benefits............................. 1,822 925 2,785 1,846
Occupancy expense..................................... 371 401 750 778
Federal deposit insurance premium..................... 170 181 339 362
Advertising and promotion............................. 92 103 174 187
Automated teller machines............................. 107 71 221 137
Data processing....................................... 242 231 493 487
Other................................................. 357 333 701 735
---------- ---------- ---------- ----------
Total noninterest expense............................ 3,161 2,245 5,463 4,532
Income (loss) before income taxes....................... (17) 1,075 825 2,211
Income tax expense (benefit)............................ (7) 457 324 898
----------- ---------- ---------- ----------
Net income (loss)..................................... $ (10) $ 618 $ 501 $ 1,313
=========== ========== ========== ==========
</TABLE>
See accompanying notes to the unaudited financial statements.
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<TABLE>
<CAPTION>
HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1996 1995
---------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 501 $ 1,313
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense.................................. 300 342
Provision for deferred income taxes.................................... 55 70
Provision for loan losses.............................................. 60 90
Increase (decrease) in deferred loan fees.............................. (78) 80
Gain on sale of real estate owned...................................... (21) -
Gain on sale of office properties and equipment........................ (1) -
Increase in accrued interest receivable................................ (14) (129)
Increase in prepaid expenses and other assets, net..................... (376) (168)
Increase (decrease) in accrued interest payable and
other liabilities, net................................................ 571 (922)
---------- ----------
Net cash provided by operating activities.......................... 997 676
---------- ----------
Cash flows from investing activities:
Net decrease in loans receivable....................................... 2,979 2,105
Repayment of mortgage-backed securities held-to-maturity............... 26 26
Purchase of office properties and equipment............................ 236 394
Proceeds from the sale of office properties and equipment.............. 1 -
Redemption of stock in the Federal Home Loan Bank of
Chicago................................................................ 378 -
---------- ----------
Net cash provided by (used in) investing activities.................. 3,620 2,525
---------- ----------
Cash flows from financing activities:
Decrease in borrowed funds.................................. (4,000) -
Decrease in savings deposits................................ (1,350) (2,769)
Net increase in advance payments by
borrowers for taxes and insurance..................................... 99 384
---------- ----------
Net cash provided by (used in) financing activities.................. (5,251) (2,385)
---------- ----------
Increase (decrease) in cash and cash equivalents....................... (634) 816
Cash and cash equivalents at beginning of period.................. 18,609 18,218
---------- ----------
Cash and cash equivalents at end of period........................ $ 17,975 $ 19,034
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest........................................................... $ 5,487 $ 5,248
Income taxes....................................................... 555 1,368
</TABLE>
See accompanying notes to the unaudited financial statements.
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HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF ELGIN
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The financial statements included herein have been prepared by the
Company without audit. In the opinion of management, the quarterly unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the financial position and
results of operations for the periods presented. Certain information and
footnote disclosures normally included in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The Company believes that
the disclosures are adequate to make the information presented not misleading,
however, the results for the periods presented are not necessarily indicative of
results to be expected for the entire year.
(2) CONVERSION TO STOCK FORM OF OWNERSHIP
On April 18, 1996, the Board of Directors adopted a Plan of Conversion
(Plan) (which was amended on June 6, 1996) whereby the Association will convert
from a federally chartered mutual thrift to a federally chartered stock savings
and loan association. The Plan is subject to approval of regulatory authorities
and members at a special meeting. The stock of the Association will be issued to
a holding company formed in connection with the conversion. Pursuant to the
Plan, shares of capital stock of the holding company are expected to be offered
initially for subscription by eligible members of the Association and certain
other persons as of specified dates subject to various subscription priorities
as provided in the Plan. The capital stock will be offered at a price to be
determined by the Board of Directors based upon an appraisal to be made by an
independent appraisal firm. The exact number of shares to be offered will be
determined by the Board of Directors in conjunction with the determination of
the price at which the shares will be sold. At least the minimum number of
shares offered in the conversion must be sold. Any stock not purchased in the
subscription offering will be sold in a community offering.
The Plan provides that when the conversion is completed, a "Liquidation
Account" will be established in an amount equal to the retained earnings of the
Association as of the date of the most recent financial statements contained in
the final conversion prospectus. The Liquidation Account is established to
provide a limited priority claim on the assets of the Association to qualifying
depositors (Eligible and Supplemental Eligible Account Holders) who continue to
maintain deposits in the Association after conversion. In the unlikely event of
a complete liquidation of the Association, and only in such an event, each
Eligible Account Holder would then receive from the Liquidation Account a
liquidation distribution based on his proportionate share of the then total
remaining qualifying deposits.
Current regulations allow the Association to pay dividends on its stock
after the conversion if its regulatory capital would not thereby be reduced
below the amount then required for the aforementioned Liquidation Account. Also,
capital distribution regulations limit the Association's ability to make capital
distributions which include dividends, stock redemptions or repurchases,
cash-out mergers, interest payments on certain convertible debt and other
transactions charged to the capital account based on their capital level and
supervisory condition. Federal regulations also preclude any repurchase of the
stock of the Association or its holding company for three years after conversion
except for repurchases of qualifying shares of a director and repurchases
pursuant to an offer made on a pro rata basis to all stockholders and with prior
approval of the Office of Thrift Supervision; or pursuant to an open-market
stock repurchase program that complies with certain regulatory criteria. The
Association has retained the services of both an underwriting firm and legal
counsel for the specific purpose of implementing the Association's plan of
conversion. At June 30, 1996, the Association had incurred approximately
$172,700 in costs relating to these services. These costs have been deferred
and, upon conversion, such costs and any additional costs will be charged
against the
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proceeds from the sale of stock. If the conversion is not completed, these
deferred costs will be charged to operations.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
At June 30, 1996, the Company had not yet issued any stock, had no
assets and no liabilities and had not conducted any business other than of an
organizational nature. Upon the closing of the Conversion of Home Federal
Savings and Loan Association of Elgin ("Home Federal") described in Note 2 to
the Financial Statements, the Company will own all of the issued and outstanding
capital stock of Home Federal. Accordingly, the following discussion relates to
the financial statements of Home Federal included herein.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1996 AND DECEMBER 31, 1995
Total assets decreased $4.1 million or 1.4% from $304.5 million at
December 31, 1995 to $300.4 million at June 30, 1996. The decrease in assets is
due primarily to a decrease in borrowed funds of $4.0 million and a decrease in
savings deposits of $1.3 million. These were offset by an increase of $626,000
in accrued interest payable and other liabilities and an increase of $501,000 in
retained earnings for the six months ended June 30, 1996. The decrease in
savings deposits of $1.3 million represents a 0.5% decrease for the six months
ended June 30, 1996. Borrowed funds of $4.0 million were repaid in February,
1996. The increase of $626,000 in accrued interest payable and other liabilities
was primarily the result of the accrual for pension benefits associated with the
recognition of an $837,000 expense related to the curtailment of pension
benefits as a result of the Association's termination of its pension plan. See
"Management of the Association -- Benefits -- Pension Plan." The $501,000
increase in retained earnings represents the net income earned for the six
months ended June 30, 1996.
The components of the Association's asset base also changed from
December 31, 1995 to June 30, 1996. Interest earning deposits decreased $1.0
million due primarily to the funds disbursed in connection with the decrease in
savings deposits of $1.3 million and repayment of borrowed funds of $4.0
million, which was offset by the funds received from the $3.3 million decrease
of loans receivable and $378,000 decrease in Federal Home Loan Bank of Chicago
(the "FHLB of Chicago") stock. The decrease in loans receivable of $3.3 million
was a result of loan repayments exceeding loan originations. The decrease in
FHLB of Chicago stock was the result of stock redemption by the FHLB of Chicago.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
1995
GENERAL. For the three months ended June 30, 1996, there was a net loss
of $11,000 compared to net income of $618,000 for the three months ended June
30, 1995. This was due primarily to the recognition of an $837,000 expense in
1996 related to the curtailment of pension benefits as a result of the
Association's termination of its pension plan. There was also a decrease of
$227,000 in net interest income before provision for loan losses. These were
offset by a decrease in income tax expense of $463,000.
INTEREST INCOME. Interest income decreased $215,000 or 3.7% from $5.8
million for the three months ended June 30, 1995 to $5.6 million for the
comparable period in 1996. The decrease was due to decreases in both the average
yield and the average balance of interest-earning assets. The average yield on
the Association's interest-earning assets decreased 16 basis points from 7.96%
for the three months ended June 30, 1995 to 7.80% for the three months ended
June 30, 1996. The average balance of interest-earning assets decreased $5.1
million or 1.8% from $291.0 million for the three months ended June 30, 1995 to
$286.9 million for the three months ended June 30, 1996, as a result of the
Association's repayment of $4.0 million in borrowings, competitive market
conditions and the Association's decision not to offer loan products at below
market interest rates.
INTEREST EXPENSE. Interest Expense increased $12,000 or 0.4% from $2.7
million for the three months ended June 30, 1995 to $2.71 million for the
comparable period in 1996. This increase was due to an increase in the cost of
average interest-bearing liabilities resulting primarily from new certificates
of deposit earning higher rates than the maturing certificates of deposit. These
increases were offset by lower average
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balances in total interest-bearing liabilities. The average rate paid on
interest-bearing liabilities increased 13 basis points from 4.12% for the three
months ended June 30, 1995 to 4.25% for the three months ended June 30, 1996.
The average amount of interest-bearing liabilities decreased $7.0 million or
2.7% to $255.5 million for the three months ended June 30, 1996 from $262.5
million for the three months ended June 30, 1995. The decrease in
interest-bearing liabilities was due to the Association's repayment of $4.0
million in borrowings, competitive market conditions and the Association's
decision not to offer above market interest rates on its savings deposits.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses decreased $227,000 or 7.3% from $3.1
million for the three months ended June 30, 1995 to $2.9 million for the
comparable period in 1996. This was due to the average interest rate spread
decreasing 29 basis points from 3.84% for the three months ended June 30, 1995
to 3.55% for the comparable period in 1996 and the decrease in the average
balance of interest-earning assets of $5.1 million or 1.8%. These were offset by
the decline in the average amount of interest-bearing liabilities of $7.0
million or 2.7%.
PROVISION FOR LOAN LOSSES. The provision for loan losses decreased by
$15,000 or 33.3% from $45,000 for the three months ended June 30, 1995 to
$30,000 for the comparable period in 1996. Management determined that decreasing
the provision for loan losses was appropriate in light of its review of the
Association's loan portfolio, asset quality, delinquent and non-performing loans
and the national and regional economies. The decrease in the provision for loan
losses was due primarily to a smaller loan portfolio at June 30, 1996. The ratio
of the allowance for loan losses to total loans was 0.33% and 0.27% at June 30,
1996 and 1995, respectively. At June 30, 1996 and 1995, the ratio of the
allowances for loan losses to non-performing loans was 78.6% and 85.6%,
respectively.
NONINTEREST INCOME. Noninterest income increased $35,000 or 13.2% from
$273,000 for the three months ended June 30, 1995 to $308,000 for the three
months ended June 30, 1996. This increase was due primarily to an increase in
service fee income of $32,000 from $268,000 for the three months ended June 30,
1995 to $300,000 for the comparable period in 1996, which was due primarily to
an increase in ATM fee income. Due to a change in ATM processors, service fee
income and expense are now accounted for on a gross basis as a part of both
noninterest income and noninterest expense.
NONINTEREST EXPENSE. Noninterest expense increased $916,000 or 40.8%
from $2.2 million for the three months ended June 30, 1995 to $3.2 million for
the three months ended June 30, 1996. This was due primarily to an increase in
compensation and benefits expense of $897,000 or 96.9% from $925,000 for the
three months ended June 30, 1995 to $1.8 million for the comparable period in
1996. The increase in compensation and benefit expense was primarily
attributable to $837,000 of pension curtailment expense, and the remaining
$60,000 increase was attributable primarily to normal salary increases and
benefit costs. The Association terminated its defined benefit plan in June,
1996, which resulted in the curtailment loss. In addition, ATM expense increased
$36,000 or 50.7% from $71,000 for the three months ended June 30, 1995 to
$107,000 for the comparable period in 1996. Due to a change in ATM processors,
service fee income and expenses are now accounted for on a gross basis as a part
of both noninterest income and noninterest expense.
INCOME TAX EXPENSE (BENEFIT). Income tax expense decreased $464,000
from a $457,000 tax expense for the three months ended June 30, 1995 to a $6,000
tax benefit for the three months ended June 30, 1996. This is due to the
decrease in income before income taxes of $1.09 million from $1.08 million for
the three months ended June 30, 1995 to a loss of $17,000 before income taxes
for the comparable period in 1996. The effective tax rate was 41.2% for the
three month period ended June 30, 1996 compared to 42.5% for the three month
period ended June 30, 1995.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
GENERAL. For the six months ended June 30, 1996, net income was
$501,000, a decrease of $812,000 or 61.8% from $1.3 million for the six months
ended June 30, 1995. This was due primarily to the recognition of an $837,000
expense in 1996 related to the curtailment of pension benefits as a result of
the
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Association's termination of its pension plan. There was also a decrease of
$570,000 in net interest income before provision for loan losses, which was
offset by a decrease in income tax expense of $574,000.
INTEREST INCOME. Interest income decreased $333,000 or 2.9% from $11.5
million for the six months ended June 30, 1995 to $11.2 million for the six
months ended June 30, 1996. The reduction was due to decreases in both the
average yield and the average balance of interest-earning assets. The average
yield on the Association's interest-earning assets decreased 12 basis points
from 7.95% for the six months ended June 30, 1995 to 7.83% for the six months
ended June 30, 1996. The average balance of interest-earning assets decreased
$4.0 million or 1.4% from $290.4 million for the six months ended June 30, 1995
to $286.4 million for the comparable period in 1996, as a result of the
Association's repayment of $4.0 million in borrowings, competitive market
conditions and the Association's decision not to offer loan products at
below-market interest rates.
INTEREST EXPENSE. Interest expense increased $237,000 or 4.5% from $5.2
million for the six months ended June 30, 1995 to $5.5 million for the six
months ended June 30, 1996. This increase was due to an increase in the cost of
average interest-bearing liabilities resulting primarily from new certificates
of deposit earning higher rates than maturing certificates of deposit. These
increases were offset by lower average balances in total interest-bearing
liabilities. The average rate paid on interest-bearing liabilities increased 28
basis points from 4.01% for the six months ended June 30, 1995 to 4.29% for the
six months ended June 30, 1996. The average amount of interest-bearing
liabilities decreased $6.0 million or 2.3% from $262.0 million for the six
months ended June 30, 1995 to $256.0 million for the comparable period in 1996.
The decrease in interest-bearing liabilities was due to the Association's
repayment of $4.0 million in borrowings, competitive market conditions and the
Association's decision not to offer above-market interest rates on its savings
deposits.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses decreased $570,000 or 9.1% from $6.3
million for the six months ended June 30, 1995 to $5.7 million for the
comparable period in 1996. This was due to the average interest rate spread
decreasing 40 basis points from 3.94% for the six months ended June 30, 1995 to
3.54% for the six months ended June 30, 1996 and the decrease in the average
balance of interest-earning assets of $4.0 million or 1.4%. These were offset by
the decline in the average amount of interest-bearing liabilities of $6.0
million or 2.3%. The reduction in the average interest rate spread was due to
the average yield on interest-earning assets decreasing 12 basis points and the
average rate paid on interest-bearing liabilities increasing 28 basis points.
PROVISION FOR LOAN LOSSES. The provision for loan losses decreased by
$30,000 or 33.3% from $90,000 for the six months ended June 30, 1995 to $60,000
for the comparable period in 1996. Management determined that decreasing the
provision for loan losses was appropriate in light of its review of the
Association's loan portfolio, asset quality, delinquent and non-performing loans
and the national and regional economies. The decrease in the provision for loan
losses was due primarily to a smaller loan portfolio at June 30, 1996. The ratio
of the allowance for loan losses to total loans was 0.33% and 0.27% at June 30,
1996 and 1995, respectively. At June 30, 1996 and 1995, the ratio of the
allowance for loan losses to non-performing loans was 78.6% and 85.6%,
respectively.
NONINTEREST INCOME. Noninterest income increased $85,000 or 15.7% from
$542,000 for the six months ended June 30, 1995 to $627,000 for the six months
ended June 30, 1996. This increase was due primarily to an increase in service
fee income of $61,000 from $533,000 for the six months ended June 30, 1995 to
$594,000 for the comparable period in 1996, which was due primarily to an
increase in ATM fee income. Due to a change in ATM processors, service fee
income and expense are now accounted for on a gross basis as a part of both
noninterest income and noninterest expense. There was also a gain of $21,000 on
the sale of real estate owned during the six months ended June 30, 1996. There
was no gain in the comparable period in 1995.
NONINTEREST EXPENSE. Noninterest expense increased $931,000 or 20.5%
from $4.5 million for the six months ended June 30, 1995 to $5.5 million for
the six months ended June 30, 1996. This was due
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primarily to an increase in compensation and benefit expense of $939,000 or
50.9% from $1.8 million for the six months ended June 30, 1995 to $2.8 million
for the comparable period in 1996. The increase in compensation and benefit
expense was attributable primarily to $837,000 of pension curtailment expense,
and the remaining $102,000 increase was primarily attributable to normal salary
increases and benefits expense. The Association terminated its defined benefit
pension plan in June, 1996, which resulted in the curtailment loss. In addition,
ATM expense increased $84,000 or 61.3% from $137,000 for the six months ended
June 30, 1995 to $221,000 for the comparable period in 1996. Due to a change in
ATM processors, service fee income and expenses are now accounted for on a gross
basis as a part of both noninterest income and noninterest expense. This was
offset by decreases in occupancy expense, federal deposit insurance premium and
other expense of $28,000, $23,000, and $34,000, respectively. The decrease in
occupancy expense was due primarily to a decrease in office building improvement
depreciation of $44,000 or 43.6% from $101,000 for the six months ended June 30,
1995 to $57,000 for the six months ended June 30, 1996. This was the result of
the building improvements to the leased South Elgin Office fully depreciating in
1995 and no depreciation expense in 1996. The decrease in federal deposit
insurance premium of $23,000 from $362,000 for the six months ended June 30,
1995 to $339,000 for the comparable period in 1996 was due to lower deposit
balances. The decrease in other noninterest expense of $34,000 or 4.6% from
$735,000 for the six months ended June 30, 1995 to $701,000 for the six months
ended June 30, 1996 was due primarily to a $19,000 decrease in real estate owned
expense and a $16,000 decrease in postage and express mail expense.
INCOME TAX EXPENSE. Income tax expense decreased $574,000 or 63.9% from
$898,000 for the six months ended June 30, 1995 to $324,000 for the six months
ended June 30, 1996. This is due primarily to the decrease in income before
income taxes of $1.4 million or 62.7% from $2.2 million for the six months ended
June 30, 1995 to $825,000 for the six months ended June 30, 1996. The effective
tax rate was 39.3% for the six months ended June 30, 1996 compared to 40.6% for
the six months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Association's primary sources of funds are savings deposits and
principal and interest payments on loans and securities and, to a limited
extent, borrowings from the FHLB of Chicago. While maturities and scheduled
amortization of loans and securities provide an indication of the timing of the
receipt of funds, changes in interest rates, economic conditions, and
competition strongly influence mortgage prepayment rates and savings deposit
flows, reducing the predictability of the timing of sources of funds.
The Association is required to maintain an average daily balance of
liquid assets and short-term liquid assets as a percentage of net withdrawable
savings deposit accounts plus short-term borrowings as defined by the
regulations of the OTS. The minimum required liquidity and short-term liquidity
ratios are currently 5.0% and 1.0%, respectively. At June 30, 1996, the
Association's liquidity ratio was 9.33% and its short-term liquidity ratio was
7.05%. The levels of the Association's short-term liquid assets are dependent on
the Association's operating, financing and investing activities during any given
period. Management believes it will have adequate resources to fund all
commitments on a short term and long term basis in accordance with its business
strategy.
The primary investing activities of the Association are the origination
of mortgage and other loans and the purchase of U.S. government or U.S.
government agency securities. There were no borrowings outstanding at June 30,
1996.
See the "Statements of Cash Flows" in the Financial Statements included
in this Form 10-Q for the sources and uses of cash flows for operating
activities, investing activities and financing activities for the three and six
months ended June 30, 1996 and 1995.
The Association has other sources of liquidity if a need for additional
funds arises, including the ability to obtain FHLB of Chicago advances of up to
$53.6 million based on the Association's current investment in FHLB of Chicago
stock.
-9-
<PAGE>
At June 30, 1996, the Association had outstanding loan origination
commitments of $6.9 million, undisbursed loans in process of $176,000 and unused
lines of consumer credit of $276,000. The Association anticipates that it will
have sufficient funds available to meet its current origination and other
lending commitments. Certificates of deposit scheduled to mature in one year or
less from June 30, 1996 totalled $71.5 million. Based upon the Association's
most recent experience and pricing strategy, management believes that a
significant portion of such deposits will remain with the Association.
At June 30, 1996, the Association exceeded all of its regulatory
capital requirements with a tangible capital level of $37.2 million, or 12.4% of
total adjusted assets, which is above the required level of $4.5 million or
1.5%; core capital of $37.2 million, or 12.4% of total adjusted assets, which is
above the required level of $9.0 million or 3.0%; and total risk-based capital
of $38.1 million, or 23.8% of risk-weighted assets, which is above the required
level of $12.8 million, or 8.0%.
-10-
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
On June 13, 1996, the Company filed a Registration Statement
on Form S-1 (Reg. No. 333-05909) with respect to the offering
of up to 7,009,250 of its Common Stock. The Registration
Statement became effective on August 8, 1996. The closing of
the offering is expected to occur during the third quarter of
1996.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibit 27 -- Financial Data Schedule*
(B) Reports on Form 8-K
None
- ---------------
* Submitted only with filing in electronic format.
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOME BANCORP OF ELGIN, INC.
---------------------------
(Registrant)
By: /S/LYLE N. DOLAN
--------------------------------
Lyle N. Dolan
Senior Vice President and Chief
Financial and Accounting Officer
September 23, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and the statements of income of Home Federal Savings and Loan
Association of Elgin and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0001016325
<NAME> Home Bancorp of Elgin, Inc.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 10,365,711
<INT-BEARING-DEPOSITS> 7,609,577
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
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<INVESTMENTS-CARRYING> 6,122,979
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<LOANS> 266,659,043
<ALLOWANCE> 885,857
<TOTAL-ASSETS> 300,396,944
<DEPOSITS> 258,621,929
<SHORT-TERM> 0
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<LONG-TERM> 0
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0
0
<OTHER-SE> 37,184,442
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<INTEREST-TOTAL> 11,207,557
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<INTEREST-EXPENSE> 5,486,492
<INTEREST-INCOME-NET> 5,721,065
<LOAN-LOSSES> 60,000
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<EXPENSE-OTHER> 5,463,491
<INCOME-PRETAX> 825,075
<INCOME-PRE-EXTRAORDINARY> 501,446
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 501,446
<EPS-PRIMARY> 0
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<YIELD-ACTUAL> 4.01
<LOANS-NON> 1,126,746
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