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, 1997
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 March 31, 1997
----- --------------
Common Stock,
par value $.01 7,009,250
<PAGE>
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements of Home Bancorp of Elgin, Inc.
Consolidated Balance Sheets (Unaudited) -- March 31, 1997
and December 31, 1996 .............................................. 1
Consolidated Statements of Earnings (Unaudited) -- Three months
ended March 31, 1997 and 1996 ...................................... 2
Consolidated Statements of Cash Flows (Unaudited) -- Three months
ended March 31, 1997 and 1996 ...................................... 3
Notes to Unaudited Consolidated Financial Statements ............... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................. 5
Item 3. Quantitative and Qualitative Disclosure About Market Risk .......... 14
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings .................................................. 14
Item 2. Changes in Securities .............................................. 14
Item 3. Defaults upon Senior Securities .................................... 14
Item 4. Submission of Matters to a Vote of Security Holders ................ 14
Item 5. Other Information .................................................. 14
Item 6. Exhibits and Reports on Form 8-K ................................... 14
Signatures .................................................................. 15
- i -
<PAGE>
Part I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS -- The consolidated statements of earnings and cash
flows for the three months ended March 31, 1996 are for Home Federal Savings and
Loan Association of Elgin ("Home Federal" or the "Association") only, because
Home Bancorp of Elgin, Inc. ("Home Bancorp" or the "Company"), the holding
company for the Association, did not commence operations until September 26,
1996 in connection with the Association's conversion from mutual to stock form.
The financial statements for 1997 are for Home Bancorp and its consolidated
subsidiary.
HOME BANCORP OF ELGIN, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, Dec. 31,
1997 1996
--------- ---------
(In thousands, except shares
and per share amounts)
<S> <C> <C>
ASSETS
Cash and due from banks ........................................... $ 5,316 $ 5,661
Interest-earning deposits ......................................... 29,967 22,341
Investment securities held to maturity ............................ 48,950 53,786
Loans receivable, net ............................................. 261,780 261,306
Government National Mortgage Association
mortgage-backed securities held to maturity ..................... 132 142
Accrued interest receivable ....................................... 1,327 1,701
Real estate owned and in judgment, at lower of cost or fair value . 377 550
Federal Home Loan Bank of Chicago stock, at cost .................. 2,678 2,678
Office properties and equipment, net .............................. 7,492 7,564
Prepaid expenses and other assets ................................. 676 606
--------- ---------
Total assets .................................................... $ 358,695 $ 356,335
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings deposits .................................................. $ 253,037 $ 251,795
Advance payment by borrowers for taxes and insurance .............. 2,975 2,012
Accrued interest payable and other liabilities .................... 1,844 2,647
--------- ---------
Total liabilities ............................................... 257,856 256,454
--------- ---------
Stockholders' Equity:
Preferred stock, $.01 par value, 3,000,000 shares
authorized; none outstanding .................................... -- --
Common stock, $.01 par value; 12,000,000 shares
authorized 7,009,250 shares issued and outstanding
at March 31, 1997 and at December 31, 1996 ...................... 70 70
Additional paid-in capital ........................................ 68,023 67,953
Retained earnings, substantially restricted ....................... 38,213 37,325
Unearned ESOP compensation ........................................ (5,467) (5,467)
--------- ---------
Total stockholders' equity ...................................... 100,839 99,881
--------- ---------
Total liabilities and stockholders' equity ........................ $ 358,695 $ 356,335
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
- 1 -
<PAGE>
<TABLE>
HOME BANCORP OF ELGIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1997 1996
------------- ------------
(In thousands, except
per share amounts)
<S> <C> <C>
INTEREST INCOME
Loans secured by real estate ...................................... $ 5,102 $ 5,311
Other loans ....................................................... 15 15
Mortgage-backed securities held to maturity ....................... 2 3
Investment securities held to maturity ............................ 682 90
Interest-earning deposits ......................................... 302 161
Federal Home Loan Bank of Chicago stock ........................... 44 49
--------- ---------
Total interest income .......................................... 6,147 5,629
INTEREST EXPENSE
Savings deposits .................................................. 2,569 2,736
Borrowed funds .................................................... -- 37
--------- ---------
Total interest expense ......................................... 2,569 2,773
--------- ---------
Net interest income before provision for loan losses .............. 3,578 2,856
Provision for loan losses ......................................... 30 30
--------- ---------
Net interest income after provision for loan losses ............... 3,548 2,826
--------- ---------
NON-INTEREST INCOME
Service fee income ................................................ 250 295
Gain on sale of real estate owned ................................. 34 18
Gain on sale of office properties and equipment ................... -- 1
Other income ...................................................... 188 5
--------- ---------
Total non-interest income ...................................... 472 319
NON-INTEREST EXPENSE
Compensation and benefits ......................................... 1,232 1,042
Occupancy expense ................................................. 397 379
Federal deposit insurance premiums ................................ 32 169
Advertising and promotion ......................................... 97 81
Automated teller machines ......................................... 96 114
Data processing ................................................... 235 252
Other ............................................................. 480 266
--------- ---------
Total non-interest expense ..................................... 2,569 2,303
--------- ---------
Income before income tax expense .................................. 1,451 842
Income tax expense ................................................ 563 330
--------- ---------
Net income ..................................................... $ 888 $ 512
========= =========
Earnings per share: ................................................ $ 0.14 NA
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE>
<TABLE>
HOME BANCORP OF ELGIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1997 1996
------------ ------------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................................. $ 888 $ 512
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense ....................................... 161 160
Provision for deferred income taxes ......................................... -- 55
Provision for loan losses ................................................... 30 30
Market adjustment for committed ESOP shares ................................. 70 --
Accretion of discounts, net ................................................. (314) (8)
Decrease in deferred loan fees .............................................. (48) (64)
Gain on sale of real estate owned ........................................... (34) (18)
Gain on sale of office properties and equipment ............................. -- (1)
Decrease (increase) in accrued interest receivable .......................... 374 (63)
Increase in prepaid expenses and other assets, net .......................... (70) (67)
Increase (decrease) in accrued interest payable and other liabilities, net .. (803) 18
--------- ---------
Net cash provided by operating activities ................................ 254 554
--------- ---------
Cash flows from investing activities:
Net decrease (increase) in loans receivable ................................. (457) 3,243
Repayment of mortgage-backed securities held-to-maturity .................... 10 13
Purchase of investment securities held-to-maturity .......................... (24,851) --
Proceeds from the maturity of investment securities held-to-maturity ........ 30,000 --
Proceeds from the sale of real estate owned ................................. 208 --
Purchase of office properties and equipment ................................. (89) (142)
Proceeds from the sale of office properties and equipment ................... -- 1
Redemption of stock in the FHLB of Chicago .................................. -- 378
--------- ---------
Net cash provided by (used in) investing activities ...................... 4,821 3,493
--------- ---------
Cash flows from financing activities:
Decrease in borrowed funds .................................................. -- (4,000)
Net increase in savings deposits ............................................ 1,242 4,513
Net increase in advance payments by borrowers for taxes and insurance ....... 963 1,070
--------- ---------
Net cash provided by financing activities ................................... 2,205 1,583
--------- ---------
Increase in cash and cash equivalents ....................................... 7,280 5,630
Cash and cash equivalents at beginning of period ............................ 28,003 18,609
--------- ---------
Cash and cash equivalents at end of period .................................. $ 35,283 $ 24,239
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ............................................................. $ 2,579 $ 2,802
Income taxes ......................................................... 175 25
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE>
HOME BANCORP OF ELGIN, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The consolidated financial statements included herein have been prepared
by the Company without audit. In the opinion of management, the quarterly
unaudited consolidated financial statements include all adjustments, consisting
of normal recurring accruals, necessary for a fair presentation of the financial
position and results of operations at and 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) Stock Conversion
On September 26, 1996, the Association completed its conversion from a
federally chartered mutual savings and loan association to a federally chartered
stock savings and loan association, and all of the capital stock of the
Association was acquired by Home Bancorp. Home Bancorp issued and sold 7,009,250
shares of its common stock, $.01 par value, at a price of $10.00 per share in a
subscription offering (the "Offering") to certain depositors of Home Federal and
to the Company's Employee Stock Ownership Plan. Net proceeds from the Offering
were $62.4 million.
(3) Earnings Per Share
Earnings per share of common stock for the three months ended March 31,
1997 has been determined by dividing net income for the three months by
6,462,529, the weighted average number of primary shares of common stock and
common stock equivalents. ESOP shares are only considered outstanding for
earnings per share calculations when they are committed to be released. Earnings
per share information for March 31, 1996 cannot be computed, because the Company
did not issue stock until September 26, 1996.
(4) Commitments and Contingencies
At March 31, 1997, the Company had outstanding commitments to originate
mortgage loans of $7.3 million, of which $6.9 million were fixed rate
commitments.
- 4 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
On September 26, 1996, Home Federal Savings and Loan Association of
Elgin ("Home Federal" or the "Association") completed its conversion from mutual
to stock form and became a wholly-owned subsidiary of Home Bancorp of Elgin,
Inc. ("Home Bancorp" or the "Company"). On such date, the Company sold 7,009,250
shares of it's common stock, par value $.01 per share to the public, at a per
share price of $10.00. The conversion and offering raised $62.4 million in net
proceeds. The Company's sole business activity consists of the ownership of the
Association. The Company also invests in short-term investment grade marketable
securities and other liquid investments. The financial data presented in this
Quarterly Report represents the activity of the Association for the three months
ended March 31, 1996 and the activity of Home Bancorp and subsidiary
consolidated for the three month period ended March 31, 1997. The Association's
principal business consists of attracting deposits from the public and investing
those deposits, along with funds generated from operations, primarily in loans
secured by mortgages on one- to four-family residences. The Association's
results of operations are dependent primarily on net interest income, which is
the difference between the interest income earned on its interest-earning
assets, such as loans and securities, and the interest expense on its
interest-bearing liabilities, such as savings deposits. The Association also
generates non-interest income such as service charges and other fees. The
Association's non-interest expenses primarily consist of employee compensation
and benefits, occupancy expenses, federal deposit insurance premiums, net costs
of real estate owned, data processing fees and other operating expenses. The
Association's results of operations are also significantly affected by general
economic and competitive conditions (particularly changes in market interest
rates), government policies and actions of regulatory agencies.
- 5 -
<PAGE>
The selected financial ratios and other data of the Company set forth below
is derived in part from, and should be read in conjunction with, the Financial
Statements of the Company and Notes thereto presented elsewhere in this report.
<TABLE>
<CAPTION>
At or For the
Three Months Ended
March 31,
------------------------------
1997 1996
---------- ----------
(Dollars in thousands, except
shares and per share amounts)
(Unaudited)
SELECTED FINANCIAL RATIOS(1):
PERFORMANCE RATIOS:
<S> <C> <C>
Return on average assets ............................. 1.00% 0.68%
Return on average equity ............................. 3.54 5.53
Average interest rate spread(2) ...................... 3.04 3.53
Net interest margin(3) ............................... 4.20 3.98
Average interest-earning assets to average
interest-bearing liabilities ....................... 138.37% 111.87%
Non-interest expense to average assets ............... 2.88 3.04
CAPITAL RATIOS(1):
Average equity to average assets ..................... 28.18 12.23
Consolidated equity to total assets at end of period . 28.11 12.13
Tangible capital(4) .................................. 20.15 12.04
Core capital(4) ...................................... 20.15 12.04
Total risk-based capital(4) .......................... 41.42 23.65
ASSET QUALITY RATIOS AND OTHER DATA(1):
Total non-performing loans(5) ........................ $ 879 $ 1,077
Real estate owned, net ............................... 377 377
Non-performing loans to total loans(6) ............... 0.33% 0.41%
Non-performing assets to total assets ................ 0.35 0.47
Allowance for loan losses to:
Non-performing loans .............................. 110.91 79.48
Total loans(6) .................................... 0.37 0.32
Number of shares outstanding(7) ...................... 7,009,250 NA
Book value per share(7) .............................. $ 14.39 NA
</TABLE>
(1) With the exception of end-of-period ratios, all ratios are based on average
monthly balances during the indicated periods and are annualized where
appropriate. Capital Ratios and Asset Quality Ratios And Other Data are
end-of-period ratios and data.
(2) The average interest rate spread represents the difference between the
weighted-average yield on interest-earning assets and the weighted-average
cost of interest-bearing liabilities.
(3) The net interest margin represents net interest income as a percentage of
average interest-earning assets.
(4) These regulatory capital ratios are for Home Federal Savings and Loan
Association of Elgin only.
(5) Non-performing loans consist of non-accrual loans; the Company did not have
any loans that were 90 days or more past due and still accruing at any of
the dates referred to in the table above.
(6) Total loans represents gross loan less deferred loan fees and loans in
process.
(7) Share information for 1996 cannot be computed, because the Company did not
issue stock until September 26, 1996.
- 6 -
<PAGE>
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between income
on interest-earning assets and expense on interest-bearing liabilities. Net
interest income depends upon the relative amounts of interest-earning assets and
interest-bearing liabilities and the interest rates earned or paid on them.
The following table sets forth certain information relating to
the Company's statements of financial condition and the statements of operations
for the three months ended March 31, 1997 and 1996, and reflects the average
yield on assets and average cost of liabilities for the periods indicated. Such
yields and costs are derived by dividing income or expense by the average
balance of assets or liabilities, respectively, for the periods shown. Average
balances are derived from average monthly balances. The yields and costs include
fees which are considered adjustments to yields.
- 7 -
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
-----------------------------------------------------------------------------
1997 1996
----------------------------------- -------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
--------- --------- --------- --------- --------- ---------
(Dollars in thousands)
ASSETS
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Real estate loans(1)............................ $ 261,616 $ 5,102 7.80% $ 265,140 $ 5,311 8.01%
Other loans..................................... 652 15 9.20 623 15 9.63
Mortgage-backed securities...................... 135 2 5.93 177 3 6.78
Investment securities........................... 51,446 682 5.30 5,953 90 6.05
Interest-earning deposits....................... 23,954 302 5.04 12,140 161 5.30
FHLB of Chicago stock........................... 2,678 44 6.72 2,930 49 6.69
--------- --------- --------- --------- --------- ---------
Total interest-earning assets................ 340,481 6,147 7.22% 286,963 5,629 7.85%
--------- --------- --------- --------- --------- ---------
Allowance for loan losses.......................... (965) (846)
Non-interest earning assets........................ 17,224 16,644
--------- ---------
Total assets................................. $ 356,740 $ 302,761
========= =========
LIABILITIES AND EQUITY:
Interest-bearing liabilities:
NOW/Super NOW accounts.......................... $ 42,523 $ 223 2.10% $ 43,066 $ 229 2.13%
Money market accounts........................... 16,843 133 3.16 17,678 142 3.21
Passbook accounts............................... 62,805 478 3.04 65,773 516 3.14
Certificates of deposit......................... 123,897 1,735 5.60 127,401 1,849 5.81
Borrowed funds.................................. -- -- -- 2,601 37 5.69
--------- --------- --------- --------- --------- ---------
Total interest-bearing liabilities........... 246,068 2,569 4.18% 256,519 2,773 4.32%
--------- --------- --------- --------- --------- ---------
Non-interest bearing NOW accounts.................. 5,474 4,314
Other non-interest-bearing liabilities............. 4,682 4,904
--------- ---------
Total liabilities............................ 256,224 265,737
--------- ---------
Stockholders' equity............................. 100,516 37,024
--------- ---------
Total liabilities and stockholders' equity... $ 356,740 $ 302,761
========= =========
Net interest income................................ $ 3,578 $ 2,856
========= =========
Interest rate spread(2)............................ 3.04% 3.53%
========= =========
Net interest margin(3)............................. 4.20% 3.98%
========= =========
Ratio of interest-earning assets to
interest-bearing liabilities..................... 138.37% 111.87%
========= =========
</TABLE>
- ----------
(1) In computing the average balance of loans, non-accrual loans have been
included.
(2) Interest rate spread represents the difference between the average yield
earned on interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
- 8 -
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1997 AND DECEMBER 31, 1996
Total assets increased $2.4 million or 0.7% from $356.3 million at
December 31, 1996 to $358.7 million at March 31, 1997. The increase in total
assets was primarily due to funds received from the $1.2 million increase in
savings deposits, $1.0 million of advance payments by borrowers for taxes and
insurance and $888,000 from operations for the three months ended March 31,
1997. These increases were offset by the disbursement of funds reducing accrued
interest payable and other liabilities by $803,000.
Interest-earning deposits increased $7.7 million or 34.1% from $22.3
million at December 31, 1996 to $30.0 million at March 31, 1997. This increase
was primarily due to the reinvestment of $4.8 million of repayments and
maturities of investment securities, funds received from the $1.2 million
increase in savings deposits and the $1.0 million increase in advance payments
by borrowers for taxes and insurance.
Investment securities decreased $4.8 million or 9.0% from $53.8 million
at December 31, 1996 to $49.0 million at March 31, 1997. The decrease was
primarily due to the reinvestment of funds generated from repayments on
securities in interest-earning deposits.
Loans receivable increased $474,000 or 0.2% from $261.3 million at
December 31, 1996 to 261.8 million at March 31, 1997. This was primarily due to
new loan originations exceeding loan repayments.
Real estate owned and in judgment decreased $173,000 or 31.5% from
$550,000 at December 31, 1996 to $377,000 at March 31, 1997. The decrease was
primarily due to the sale of one of the properties in real estate owned and no
additions to real estate owned and in judgment during the three months ended
March 31, 1997.
Savings deposits increased $1.2 million or 0.5% from $251.8 million at
December 31, 1996 to $253.0 million at March 31, 1997. The increase was
primarily the result of interest credits and deposits exceeding withdrawals.
Stockholders' equity increased $958,000 or 1.0% from $99.9 million at
December 31, 1996 to $100.8 million at March 31, 1997. The increase is primarily
from net income of $888,000 for the three months ended March 31, 1997.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
1996
GENERAL. Net income for the three months ended March 31, 1997 increased
$376,000 or 73.4% from $512,000 for the three months ended March 31, 1996 to
$888,000 for the three months ended March 31, 1997 or $0.14 per share. The
$376,000 increase was primarily due to an increase of $722,000 in net interest
income before provision for loan losses and an increase of $153,000 in
non-interest income. These increases were offset, in part, by an increase of
$266,000 in non-interest expense and an increase of $233,000 in income tax
expense. The increase in net interest income was primarily due to a 26.5%
increase in the ratio of interest-earning assets to average interest-bearing
liabilities from 111.87% for the three months ended March 31, 1996 to 138.37%
for the three months ended March 31, 1997, which was offset in part by a 49
basis point decrease in the average interest rate spread from 3.53% for the
three months ended March 31, 1996 to 3.04% for the three months ended March 31,
1997. The decrease in the average interest rate spread was primarily due to a
decrease in the average rate on interest-earning assets of 0.63% from 7.85% for
the three months ended March 31, 1996 to 7.22% for the three months ended March
31, 1997, which was partially offset by the decrease in the average cost on
interest-bearing liabilities of 0.14% from 4.32% for the three months ended
March 31, 1996 to 4.18% for the three months ended March 31, 1997.
- 9 -
<PAGE>
INTEREST INCOME. Interest income increased $518,000 or 9.2% from $5.6
million for the three months ended March 31, 1996 to $6.1 million for the three
months ended March 31, 1997. This was due primarily to an increase in the
average balance of interest-earning assets of $53.5 million or 18.6% from $287.0
million for the three months ended March 31, 1996 to $340.5 million for the
three months ended March 31, 1997. This increase was partially offset by a
decrease in the average yield on interest-earning assets of 63 basis points from
7.85% for the three months ended March 31, 1996 to 7.22% for the three months
ended March 31, 1997. The increase in the average balance of interest-earning
assets was primarily due to receipt of the net proceeds from the Offering, which
was partially offset by the decease in the average balance of interest-earning
assets due to market conditions. The average rate on interest-earning assets
decreased primarily as a result of the change in the composition of
interest-earning assets. The average balance of investment securities and
interest-earning deposits increased $57.3 million from $18.1 million for the
three months ended March 31, 1996 to $75.4 million for the three months ended
March 31, 1997. These assets are the lowest yielding components of
interest-earning assets, and as a result the large increase in these assets, the
average yield was reduced. The average yield on interest-earning assets also
decreased as a result of the rates on new loan originations being lower than the
rates on loans repaid and lower average yields on interest-earning deposits and
investment securities for the three months ended March 31, 1997 compared to the
three months ended March 31, 1996.
INTEREST EXPENSE. Interest expense decreased $204,000 or 7.4% from $2.8
million for the three months ended March 31, 1996 to $2.6 million for the three
months ended March 31, 1997. This decrease was primarily due to the decrease in
the average balance of interest-bearing liabilities of $10.4 million or 4.1%
from $256.5 million for the three months ended March 31, 1996 to $246.1 million
for the three months ended March 31, 1997 and the decrease in the average rate
paid on interest-bearing liabilities of 14 basis points from 4.32% for three
months ended March 31, 1996 to 4.18% for the three months ended March 31, 1997.
The decrease in the average balance of interest-bearing liabilities was due to
competitive market conditions and the Association's decision not to offer
above-market interest rates on its savings deposits. The decrease in the average
rate paid on interest-bearing liabilities is due primarily to new certificates
of deposit bearing lower rates of interest than maturing deposits.
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest
income before provision for loan losses increased $722,000 or 25.3% from $2.9
million for the three months ended March 31, 1996 to $3.6 million for the three
months ended March 31, 1997. This was primarily due to the 26.5% increase in the
ratio of average interest-earning assets to average interest-bearing liabilities
from 111.87% for the three months ended March 31, 1996 to 138.37% for the three
months ended March 31, 1997. This increase was offset, in part, by the 49 basis
point decrease in the average interest rate spread from 3.53% for the three
months ended March 31, 1996 to 3.04% for the three months ended March 31, 1997.
PROVISION FOR LOAN LOSSES. The provision for loan losses was $30,000
for each period. Management determined that keeping the provision for loan
losses at the same level was appropriate in light of its current review of the
Association's loan portfolio, asset quality, delinquent and non-performing
loans, the historically low loan loss experience and the national and regional
economies. Management also considered the fact that the Association had a
slightly smaller loan portfolio at March 31, 1997, as compared to March 31,
1996. The ratio of the allowance for loan losses to non-performing loans was
110.91% and 79.48% at March 31, 1997 and March 31, 1996, respectively, and the
ratio of the allowance for loan losses to total loans was 0.37% and 0.32% at
such respective dates. Management believes that the provision for loan losses
and the allowance for loan losses are reasonable and adequate to cover any known
losses and any losses reasonably expected in the existing loan portfolio. While
management estimates loan losses using the best available information, such as
independent appraisals for significant collateral properties, no assurance can
be given that future additions to the allowance will not be necessary based on
changes in economic and real estate market conditions, further information
obtained regarding known problem loans, identification of additional problem
loans, regulatory examinations and other factors, both within and outside of
management's control.
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<PAGE>
NON-INTEREST INCOME. Non-interest income increased $153,000 or 48.0%
from $319,000 for the three months ended March 31, 1996 to $472,000 for the
three months ended March 31, 1997. The increase was primarily due to an increase
in other income of $183,000 from $5,000 for the three months ended March 31,
1996 to $188.000 for the three months ended March 31, 1997. In addition, gain on
sale of real estate owned increased $16,000 or 88.9% from $18,000 for the three
months ended March 31, 1996 to $34,000 for the three months ended March 31,
1997. These increases were partially offset by the decrease in service fee
income of $45,000 from $295,000 for the three months ended March 31, 1996 to
$250,000 of the three months ended March 31, 1997. The increase in other income
is due primarily to the receipt of $182,000 in excess funds from the liquidation
of the Association's pension plan in connection with the Conversion. The gain on
sale of real estate owned for the three months ended March 31, 1997 was the
result of the sale of one real estate owned property. The decrease in service
fee income was comprised of a decrease of $11,000 in service fee income on NOW
accounts, a decrease of $14,000 in overdraft fees and a $17,000 decrease in ATM
fees, which were primarily as a result of changes made to the account pricing
structures for NOW accounts and ATM fees for competitive purposes during the
three months ended March 31, 1997.
NON-INTEREST EXPENSE. Non-interest expense increased $266,000 or 11.6%
from $2.3 million for the three months ended March 31, 1996 to $2.6 million for
the three months ended March 31, 1997. This increase is primarily due to
increases in compensation and benefits and other expenses, which were partially
offset by a decrease in federal deposit insurance premiums and expenses
associated with ATMs and data processing. Compensation and benefits expense
increased $190,000 or 18.2% from $1,042,000 for the three months ended March 31,
1996 to $1,232,000 for the three months ended March 31, 1997. This increase was
due to expense of $209,000 as a result of the adoption of the ESOP, which was
partially offset by the decrease in pension expense of $62,000 due to the
termination of the pension plan. The remainder was primarily attributable to
normal salary increases. Other expense increased $214,000 or 80.5% from $266,000
for the three months ended March 31, 1996 to $480,000 for the three months ended
March 31, 1997. This increase was primarily due to increases in professional
fees, stationery, printing and office supplies, transfer agent fees and
franchise tax resulting from operations as a public company. The decrease in
federal deposit insurance premiums of $137,000 or 81.1% from $169,000 for the
three months ended March 31, 1996 to $32,000 for the three months ended March
31, 1997 was primarily due to reduced federal deposit insurance premiums as a
result of the Deposit Insurance Funds Act of 1996. The decrease in ATM expense
of $18,000 or 15.8% from $114,000 for the three months ended March 31, 1996 to
$96,000 for the three months ended March 31, 1997 was due primarily to
additional nonrecurring expenses in 1996 of $17,000 associated with the change
in the Association's ATM processors. The decrease in data processing expense of
$17,000 or 6.7% from $252,000 for the three months ended March 31, 1996 to
$235,000 for the three months ended March 31,1997 is primarily due to a
nonrecurring charge for processing for the three months ended March 31, 1996 of
$15,000.
INCOME TAX EXPENSE. Income tax expense increased $233,000 or 70.6% from
$330,000 for the three months ended March 31, 1996 to $563,000 for the three
months ended March 31, 1997. The effective tax rate was 38.8% for the three
months ended March 31, 1997, which was comparable to 39.2% for the three months
ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are savings deposits, 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
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<PAGE>
1.0%, respectively. At March 31, 1997, the Association's liquidity ratio was
21.80%, and its short-term liquidity ratio was 21.80%. 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 Company are the origination of
mortgage and other loans and the purchase of U. S. government or U. S.
government agency securities. See the "Consolidated Statements of Cash Flows" in
the unaudited Consolidated 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 months ended March 31, 1997
and 1996.
The Company 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. There were no borrowings outstanding at March 31, 1997.
At March 31, 1997, the Association had outstanding loan origination
commitments of $7.3 million, undisbursed loans in process of $708,000 and unused
lines of consumer credit of $262,000. 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 March 31, 1997 totalled $73.1 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 March 31, 1997, the Association exceeded all of its regulatory
capital requirements with a tangible capital level of $66.4 million, or 20.15%
of total adjusted assets, which is above the required level of $4.9 million or
1.5%; core capital of $66.4 million, or 20.15% of total adjusted assets, which
is above the required level of $9.9 million or 3.0%; and total risk-based
capital of $67.4 million, or 41.42% of risk-weighted assets, which is above the
required level of $13.0 million, or 8.0%.
At March 31, 1997, the total stockholders' equity of Home Bancorp was
$100.8 million. The ratio of stockholders' equity to total assets at March 31,
1997 was 28.11%.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1997, FASB Statement No. 128, "Earnings Per Share"
("Statement 128"), was issued. Statement 128 supersedes APB Opinion No. 15,
Earnings Per Share and specifies the computation, presentation, and disclosure
requirements for earnings per share ("EPS") for entities with publicly held
common stock or potential common stock. Statement 128 was issued to simplify the
computation of EPS and make the U.S. standard more compatible with the EPS
standards of other countries and that of the International Accounting Standards
Committee. It replaces the presentation of primary EPS with a presentation of
basic EPS and fully diluted EPS with diluted EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation.
Basic EPS, unlike primary EPS, excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Diluted EPS is
computed similarly to fully diluted EPS under APB 15.
Statement 128 is effective for financial statements for both interim
and annual periods ending after December 15, 1997. Earlier application is not
permitted (although pro forma EPS disclosure in the footnotes for periods prior
to required adoption is permitted). After adoption, all prior-period EPS data
presented shall be
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<PAGE>
restated to conform with Statement 128. The Company does not expect adoption of
Statement 128 to have a significant impact on the Company's financial
statements.
OTHER
On May 1, 1997, the Company adopted a stock repurchase program
("Repurchase Program"), which authorizes the Company to repurchase up to 350,462
shares, or five percent, of its 7,009,250 outstanding common shares. The
Repurchase Program is subject to approval from the Office of Thrift Supervision
("OTS") and will commence as soon as practicable following OTS approval and
continue for a period of up to six months. The repurchases will be made from
time to time at the discretion of management.
The Repurchase Program will be implemented in addition to the purchase
of 280,370, or four percent, of the Company's outstanding common shares by the
Company's Recognition and Retention Plan ("RRP"), which was approved by the
Company's stockholders at its recent annual meeting. Shares acquired for the RRP
will be purchased by an independent trustee from time to time, in either open
market or privately negotiated transactions.
- 13 -
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable
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 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.
- 14 -
<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
Executive Vice President and Chief
Financial and Accounting Officer
May 12, 1997
- 15 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and the statements of income of Home Bancorp of
Elgin, Inc. and Subsidiary and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,315,728
<INT-BEARING-DEPOSITS> 29,966,597
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 49,082,060
<INVESTMENTS-MARKET> 49,062,194
<LOANS> 264,931,612
<ALLOWANCE> 975,367
<TOTAL-ASSETS> 358,694,550
<DEPOSITS> 253,036,643
<SHORT-TERM> 0
<LIABILITIES-OTHER> 4,818,578
<LONG-TERM> 0
0
0
<COMMON> 70,093
<OTHER-SE> 100,769,236
<TOTAL-LIABILITIES-AND-EQUITY> 358,694,550
<INTEREST-LOAN> 5,116,775
<INTEREST-INVEST> 1,030,523
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 6,147,298
<INTEREST-DEPOSIT> 2,568,901
<INTEREST-EXPENSE> 2,568,901
<INTEREST-INCOME-NET> 3,578,397
<LOAN-LOSSES> 30,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,568,651
<INCOME-PRETAX> 1,451,565
<INCOME-PRE-EXTRAORDINARY> 888,384
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 888,384
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
<YIELD-ACTUAL> 4.20
<LOANS-NON> 879,387
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 503,167
<ALLOWANCE-OPEN> 944,799
<CHARGE-OFFS> 0
<RECOVERIES> 568
<ALLOWANCE-CLOSE> 975,367
<ALLOWANCE-DOMESTIC> 975,367
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
