<PAGE> 1
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FORM 10-QSB
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
For the transition period from __________ to ____________.
Commission File Number 000-23927
---------
HOME LOAN FINANCIAL CORPORATION
-------------------------------
(Exact name of small business issuer as specified in its charter)
Ohio 31-1578552
---- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
401 Main Street, Coshocton, Ohio 43812
--------------------------------------
(Address of principal executive offices)
(740) 622-0444
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
--- ---
As of October 31, 1998 the latest practical date, 2,188,250 of the issuer's
common shares, no par value, were issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
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<PAGE> 2
HOME LOAN FINANCIAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
PART I -FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited)
Consolidated Balance Sheets .............................................. 3
Consolidated Statements of Income and Comprehensive Income................ 4
Consolidated Statements of Changes in Shareholders' Equity................ 5
Consolidated Statements of Cash Flows .................................... 6
Notes to Consolidated Financial Statements ............................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................ 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................... 23
Item 2. Changes in Securities and Use of Proceeds............................ 23
Item 3. Defaults Upon Senior Securities...................................... 23
Item 4. Submission of Matters to a Vote of Security Holders.................. 23
Item 5. Other Information.................................................... 24
Item 6. Exhibits and Reports on Form 8-K..................................... 24
SIGNATURES ............................................................................. 25
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</TABLE>
2
<PAGE> 3
HOME LOAN FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
September 30, June 30,
1998 1998
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,335,997 $ 1,323,331
Interest-bearing deposits in other banks 292,989 533,817
Overnight deposits 2,500,000 1,000,000
Federal funds sold 2,500,000 4,800,000
------------- -------------
Total cash and cash equivalents 6,628,986 7,657,148
Interest-bearing time deposits 2,037,617 2,037,137
Securities available for sale 12,829,410 14,018,560
Mortgage-backed securities available for sale 1,138,937 --
Loans, net 60,492,076 56,824,312
Premises and equipment, net 466,802 471,799
Federal Home Loan Bank stock 400,100 393,000
Accrued interest receivable 626,084 475,183
Other assets 70,830 37,850
------------- -------------
Total assets $ 84,690,842 $ 81,914,989
============= =============
LIABILITIES
Deposits $ 48,826,284 $ 48,537,875
Federal Home Loan Bank advances 3,000,000 1,000,000
Accrued interest payable 502,812 480,365
Accrued expenses and other liabilities 428,913 332,115
------------- -------------
Total liabilities 52,758,009 50,350,355
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 500,000 shares authorized,
none outstanding -- --
Common stock, no par value, 9,500,000 shares authorized,
2,248,250 shares issued and outstanding -- --
Additional paid-in capital 21,963,422 21,948,437
Retained earnings - substantially restricted 11,565,265 11,285,160
Unearned employee stock ownership plan shares (1,648,720) (1,678,690)
Net unrealized gain on securities available for sale,
net of tax 52,866 9,727
------------- -------------
Total shareholders' equity 31,932,833 31,564,634
------------- -------------
Total liabilities and shareholders' equity $ 84,690,842 $ 81,914,989
============= =============
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</TABLE>
See accompanying notes to consolidated financial statements.
3.
<PAGE> 4
HOME LOAN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Three Months Ended
September 30,
1998 1997
---- ----
<S> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans, including fees $ 1,316,504 $ 1,137,188
Securities 208,445 74,490
Dividends on Federal Home Loan Bank stock 7,182 6,688
Interest-bearing deposits and federal funds sold 91,885 35,584
------------ ------------
Total interest income 1,624,016 1,253,950
INTEREST EXPENSE
Deposits 525,138 516,919
Federal Home Loan Bank advances 19,714 --
------------ ------------
Total interest expense 544,852 516,919
------------ ------------
NET INTEREST INCOME 1,079,164 737,031
Provision for loan losses 30,000 30,000
------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,049,164 707,031
NONINTEREST INCOME
Service charges and other fees 38,301 33,910
Other income 12,355 9,437
------------ ------------
Total noninterest income 50,656 43,347
NONINTEREST EXPENSE
Salaries and employee benefits 273,521 234,659
Occupancy and equipment 34,985 34,452
State franchise taxes 38,100 36,900
Computer processing 30,713 23,880
SAIF deposit insurance premiums 8,413 7,468
Legal, audit and supervisory exam fees 22,500 18,076
Director fees 21,625 19,275
Other expense 57,845 40,398
------------ ------------
Total noninterest expense 487,702 415,108
------------ ------------
INCOME BEFORE INCOME TAXES 612,118 335,270
Income tax expense 219,600 122,100
------------ ------------
NET INCOME $ 392,518 $ 213,170
OTHER COMPREHENSIVE INCOME, NET OF TAX
Unrealized gain on available for sale
securities arising during the period 43,139 8,787
Reclassification for realized amount -- (80)
------------ ------------
COMPREHENSIVE INCOME $ 435,657 $ 221,877
============ ============
BASIC AND DILUTED EARNINGS PER
COMMON SHARE $ .19 $ N/A
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 2,081,880 N/A
============ ============
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</TABLE>
See accompanying notes to consolidated financial statements.
4.
<PAGE> 5
HOME LOAN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Three months ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Unrealized
Gain on
Additional Unearned Securities
Paid-In Retained ESOP Available
Capital Earnings Shares for Sale Total
------- -------- ------ -------- -----
<S> <C> <C> <C> <C> <C>
Balance at
July 1, 1997 $ -- $ 10,366,232 $ -- $ 4,032 $ 10,370,264
Net income for
the period -- 213,170 -- -- 213,170
Change in fair value
of securities available
for sale -- -- -- 8,707 8,707
------------ ------------ ------------ ------------ ------------
Balance at
September 30, 1997 $ -- $ 10,579,402 $ -- $ 12,739 $ 10,592,141
============ ============ ============ ============ ============
Balance at
July 1, 1998 $ 21,948,437 $ 11,285,160 $ (1,678,690) $ 9,727 $ 31,564,634
Net income for
the period -- 392,518 -- -- 392,518
Cash dividend - $.05
per share -- (112,413) -- -- (112,413)
Commitment
to release
employee stock
ownership
plan shares 14,985 -- 29,970 -- 44,955
Change in fair value
of securities available
for sale -- -- -- 43,139 43,139
------------ ------------ ------------ ------------ ------------
Balance at
September 30, 1998 $ 21,963,422 $ 11,565,265 $ (1,648,720) $ 52,866 $ 31,932,833
============ ============ ============ ============ ============
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</TABLE>
See accompanying notes to consolidated financial statements.
5.
<PAGE> 6
HOME LOAN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Three Months Ended
September 30,
-------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 392,518 $ 213,170
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation 19,500 21,150
Securities amortization and accretion 4,819 (403)
Provision for loan losses 30,000 30,000
FHLB stock dividends (7,100) (6,600)
Deferred taxes -- 61,531
Compensation expense on ESOP shares 44,955 --
Net change in accrued interest receivable and other assets (183,881) 86,823
Net change in accrued expenses and other liabilities 97,022 257,775
Net change in deferred loan fees 7,608 5,201
------------- -------------
Net cash from operating activities 405,441 545,585
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Proceeds from maturities 1,250,000 500,000
Mortgage-backed securities available for sale:
Purchases (1,170,340) --
Proceeds from maturities and principal paydowns 31,096 --
Net change in interest-bearing time deposits (480) --
Net change in loans (3,705,372) (2,508,397)
Premises and equipment expenditures (14,503) (6,308)
------------- -------------
Net cash from investing activities (3,609,599) (2,014,705)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 288,409 (1,027,827)
Proceeds from long-term FHLB advances 2,000,000 --
Cash dividends paid (112,413) --
------------- -------------
Net cash from financing activities 2,175,996 (1,027,827)
------------- -------------
Net change in cash and cash equivalents (1,028,162) (2,496,947)
Cash and cash equivalents at beginning of period 7,657,148 4,681,049
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,628,986 $ 2,184,102
============= =============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 522,405 $ 441,425
Income taxes 280,600 52,849
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</TABLE>
See accompanying notes to consolidated financial statements.
6.
<PAGE> 7
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim consolidated financial statements are prepared without audit and
reflect all adjustments which, in the opinion of management, are necessary to
present fairly the financial position of Home Loan Financial Corporation
("Corporation") at September 30, 1998, and its results of operations and cash
flows for the periods presented. All such adjustments are normal and recurring
in nature. The accompanying consolidated financial statements have been prepared
in accordance with the instructions for Form 10-QSB and, therefore, do not
purport to contain all the necessary financial disclosures required by generally
accepted accounting principles that might otherwise be necessary in the
circumstances, and should be read in conjunction with the consolidated financial
statements and notes thereto of the Corporation for the fiscal year ended June
30, 1998. The accounting policies of the Corporation described in the notes to
the consolidated financial statements contained in the Corporation's June 30,
1998, consolidated financial statements, have been consistently followed in
preparing this Form 10-QSB.
The consolidated financial statements include the accounts of Home Loan
Financial Corporation and its wholly-owned subsidiary, The Home Loan Savings
Bank ("Bank"). All significant intercompany transactions and balances have been
eliminated.
The Corporation's and Bank's revenues, operating income and assets are primarily
from the financial institution industry. The Bank is engaged in the business of
residential mortgage lending and consumer banking with operations conducted
through its main and branch offices located in Coshocton, Ohio. This community
and the contiguous areas are the source of substantially all the Bank's loan and
deposit activities.
To prepare financial statements in conformity with generally accepted accounting
principles, management makes estimates and assumptions based on available
information. These estimates and assumptions affect the amounts reported in the
financial statements and disclosures provided, and future results could differ.
The allowance for loan losses, fair values of financial instruments and status
of contingencies are particularly subject to change.
Income tax expense is the sum of current-year income tax due or refundable and
the change in deferred tax assets and liabilities. Deferred tax assets and
liabilities are the expected future tax consequences of temporary differences
between the carrying amounts and tax bases of assets and liabilities, computed
using enacted tax rates. A valuation allowance, if needed, reduces deferred tax
assets to the amount expected to be realized. Income tax expense is based on the
effective rate expected to be applicable for the entire year.
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(Continued)
7.
<PAGE> 8
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basic earnings per common share are computed by dividing net income by the
weighted average number of shares outstanding during the year. Diluted earnings
per share further assumes the issuance of any potentially dilutive common
shares. The Corporation currently has no potentially dilutive common stock
equivalents. As more fully discussed in Note 2, the Bank converted from the
mutual to stock form of ownership with the concurrent formation of a holding
company effective March 25, 1998. Accordingly, earnings per share for the three
months ended September 30, 1997 is not applicable. The weighted average number
of shares outstanding for basic earnings per share during the three months ended
September 30, 1998 is the total weighted average shares outstanding of 2,248,250
less the average unallocated ESOP shares of 166,370, or 2,081,880 shares.
Unreleased ESOP shares are not considered to be outstanding shares for
determining the weighted average number of shares used in the earnings per
common share calculation.
Home Loan Financial Corporation adopted on July 1, 1998, Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS No. 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. It does not require a
specific format for that financial statement, but requires an enterprise display
an amount representing total comprehensive income for the period in that
financial statement.
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. Reclassification of financial statements for earlier periods
provided for comparative purposes is required.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" changes the way that public business enterprises report information
about operating segments in annual financial statements and requires that those
enterprises report selected information about reportable segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. SFAS No. 131 uses a "management approach" to disclose financial and
descriptive information about an enterprise's reportable operating segments
which is based on reporting information the way that management organizes the
segments within the enterprise for making operating decisions and assessing
performance. For many enterprises, the management approach will likely result in
more segments being reported. In addition, SFAS No. 131 requires significantly
more information to be disclosed for each reportable segment than is presently
being reported in annual financial statements. SFAS No. 131 also requires
selected information to be reported in interim financial statements. SFAS No.
131 is effective for
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(Continued)
8.
<PAGE> 9
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
financial statements for periods beginning after December 15, 1997. SFAS No. 131
did not have a significant impact on the Corporation.
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits" amends the disclosure requirements of previous pension and other
postretirement benefit accounting standards by requiring additional disclosures
about such plans as well as eliminating some disclosures no longer considered
useful. SFAS No. 132 also allows greater aggregation of disclosures for
employers with multiple defined benefit plans. SFAS No. 132 will be effective in
fiscal 1999 and is not expected to have a significant impact on the
Corporation's financial statements.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. The key criterion
for hedge accounting is that the hedging relationship must be highly effective
in achieving offsetting changes in fair value or cash flows. SFAS No. 133 does
not allow hedging of a security which is classified as held to maturity. Upon
adoption of SFAS No. 133, companies may reclassify any security from held to
maturity to available for sale if they wish to be able to hedge the security in
the future. SFAS No. 133 is effective for fiscal years beginning after June 15,
1999 with early adoption encouraged for any fiscal quarter beginning July 1,
1998 or later, with no retroactive application. Management does not expect the
adoption of SFAS No. 133 to have a significant impact on the Corporation's
financial statements.
NOTE 2 - CONSUMMATION OF THE CONVERSION TO A STOCK SAVINGS AND
LOAN ASSOCIATION WITH THE CONCURRENT FORMATION OF A
HOLDING COMPANY
On November 12, 1997, the Board of Directors of the Bank unanimously adopted a
Plan of Conversion to convert from a state-chartered mutual savings and loan
association to a state-chartered stock savings and loan association with the
concurrent formation of a holding company. The conversion was consummated on
March 25, 1998, by amending the Bank's Articles of Incorporation and the sale of
the Corporation's common stock in an amount equal to the pro forma market value
of the Bank after giving effect to the conversion. Common shares of the
Corporation were offered in accordance with the Plan of Conversion. A total of
2,248,250 common shares of the Corporation were sold at $10.00 per share and net
proceeds from the sale were $21,880,273 after deducting the costs of conversion.
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(Continued)
9.
<PAGE> 10
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTE 2 - CONSUMMATION OF THE CONVERSION TO A STOCK SAVINGS AND
LOAN ASSOCIATION WITH THE CONCURRENT FORMATION OF A
HOLDING COMPANY (Continued)
The Corporation retained 50% of the net proceeds from the sale of common shares.
The remainder of the net proceeds was invested in the capital stock issued by
the Bank to the Corporation in connection with the Conversion.
At the time of the conversion, the Bank established a liquidation account in an
amount equal to its regulatory capital as of September 30, 1997. The liquidation
account will be maintained for the benefit of eligible depositors who continue
to maintain their accounts at the Bank after the conversion. The liquidation
account will be reduced annually to the extent that eligible depositors have
reduced their qualifying deposits. Subsequent increases will not restore an
eligible account holder's interest in the liquidation account. In the event of a
complete liquidation, each eligible depositor will be entitled to receive a
distribution from the liquidation account in an amount proportionate to the
current adjusted qualifying balances for accounts then held. The Bank may not
pay dividends that would reduce shareholders' equity below the required
liquidation account balance.
Under Office of Thrift Supervision ("OTS") regulations, limitations have been
imposed on all "capital distributions" by savings institutions, including cash
dividends. The regulation establishes a three-tiered system of restrictions,
with the greatest flexibility afforded to thrifts that are both well capitalized
and given favorable qualitative examination ratings by the OTS.
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(Continued)
10.
<PAGE> 11
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTE 3 - SECURITIES
The amortized cost and estimated fair values of securities at September 30, 1998
and June 30, 1998 are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1998
---------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Treasury notes $ 4,250,380 $ 21,729 $ -- $ 4,272,109
U.S. Government agencies 8,498,930 58,599 (228) 8,557,301
-------------- ---------- ----------- ---------------
$ 12,749,310 $ 80,328 $ (228) $ 12,829,410
============== ========== =========== ===============
MORTGAGE-BACKED SECURITIES
AVAILABLE FOR SALE
U.S. Government agencies $ 1,138,937 $ -- $ -- $ 1,138,937
============== ========== =========== ===============
<CAPTION>
June 30, 1998
---------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Treasury notes $ 5,504,113 $ 15,154 $ (907) $ 5,518,360
U.S. Government agencies 8,499,709 2,024 (1,533) 8,500,200
-------------- ---------- ----------- ---------------
$ 14,003,822 $ 17,178 $ (2,440) $ 14,018,560
============== ========== =========== ===============
</TABLE>
The amortized cost and estimated fair values of securities at September 30,
1998, by contractual maturity, are shown below. Actual maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
---- -----
<S> <C> <C>
Due in one year or less $ 8,501,014 $ 8,529,394
Due after one year through five years 4,248,296 4,300,016
-------------- ---------------
12,749,310 12,829,410
Mortgage-backed securities 1,138,937 1,138,937
-------------- ---------------
$ 13,888,247 $ 13,968,347
============== ===============
</TABLE>
During the three months ended September 30, 1997, a U.S. Treasury security
classified as available for sale was sold within ninety days of its maturity.
Proceeds from this transaction are reflected as a maturity in the Consolidated
Statement of Cash Flows. The gain on this transaction was $121. No other
securities were sold during the three months ended September 30, 1998 and 1997.
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(Continued)
11.
<PAGE> 12
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 4 - LOANS
Loans at September 30, 1998 and June 30, 1998 are summarized as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
---- ----
<S> <C> <C>
Residential real estate loans:
1 - 4 family $ 41,281,187 $ 39,551,521
Home equity 1,656,060 1,527,535
Nonresidential real estate 4,640,487 4,307,546
Real estate construction 2,148,656 1,368,801
Land 702,683 686,453
------------ ------------
Total real estate loans 50,429,073 47,441,856
Commercial loans 1,915,339 1,429,324
Consumer loans:
Home improvement 4,033,893 3,993,214
Automobile 3,102,785 2,997,589
Deposit 378,036 421,710
Credit card 413,742 410,624
Other 1,639,666 1,527,817
------------ ------------
Total consumer loans 9,568,122 9,350,954
------------ ------------
Total loans 61,912,534 58,222,134
Less:
Allowance for loan losses (253,606) (223,237)
Loans in process (1,038,405) (1,053,746)
Net deferred loan fees and costs (128,447) (120,839)
------------ ------------
$ 60,492,076 $ 56,824,312
============ ============
</TABLE>
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
Three Months
Ended September 30,
-------------------
1998 1997
---- ----
<S> <C> <C>
Beginning balance $ 223,237 $ 119,218
Provision for losses 30,000 30,000
Loans charged off -- (1,441)
Recoveries of previous charge-offs 369 445
---------- ----------
Ending balance $ 253,606 $ 148,222
========== ==========
</TABLE>
As of September 30, 1998 and June 30, 1998 and for the three months ended
September 30, 1998 and 1997, impaired loans were immaterial. No loans were on
nonaccrual status at September 30, 1998 and June 30, 1998.
- --------------------------------------------------------------------------------
(Continued)
12.
<PAGE> 13
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 5 - COMMITMENTS, OFF-BALANCE SHEET RISK AND CONTINGENCIES
Various contingent liabilities are not reflected in the consolidated financial
statements, including claims and legal actions arising in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
the ultimate disposition of these matters is not expected to have a material
effect on the Corporation's financial condition or results of operations.
Some financial instruments are used in the normal course of business to meet the
financing needs of customers and to reduce exposure to interest rate changes.
These financial instruments include commitments to extend credit, standby
letters of credit and financial guarantees. These involve, to varying degrees,
credit and interest-rate risk more than the amounts reported in the financial
statements.
Exposure to credit loss if the other party does not perform is represented by
the contractual amount for commitments to extend credit, standby letters of
credit and financial guarantees written. The same credit policies are used for
commitments and conditional obligations as are used for loans. The amount of
collateral obtained, if deemed necessary, on extension of credit is based on
management's credit evaluation and generally consists of residential or
commercial real estate.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the commitment.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being used, the total commitments do not necessarily represent
future cash requirements. Standby letters of credit and financial guarantees
written are conditional commitments to guarantee a customer's performance to a
third party.
A summary of the notional or contractual amounts of financial instruments with
off-balance sheet risk at September 30, 1998 and June 30, 1998 follows:
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
---- ----
<S> <C> <C>
Lines of credit-variable rate $1,669,000 $1,728,000
1-4 family residential real estate-variable rate 816,000 782,000
1-4 family residential real estate-fixed rate 191,000 134,000
Commercial real estate-variable rate -- 225,000
Credit card arrangements-fixed rate 810,000 771,000
</TABLE>
The interest rate on fixed-rate commitments ranged from 6.50% to 13.90% at
September 30, 1998 and 7.13% to 13.90% at June 30, 1998. The interest rates on
variable rate commitments ranged from 6.00% to 7.00% at September 30, 1998 and
6.75% to 7.00% at June 30, 1998.
- --------------------------------------------------------------------------------
(Continued)
13.
<PAGE> 14
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 6 - EMPLOYEE STOCK OWNERSHIP PLAN
The Corporation offers an employee stock ownership plan ("ESOP") for the benefit
of substantially all employees of the Corporation and the Bank. The
establishment of the ESOP and the purchase by the ESOP of the common shares of
the Corporation are subject to the receipt of a favorable determination letter
on the qualified status of the ESOP under applicable provisions of the Internal
Revenue Code. Although no assurances can be given, the Corporation expects that
the ESOP will receive a favorable determination letter.
The ESOP borrowed funds from the Corporation with which to acquire common shares
of the Corporation. The loan is secured by the shares purchased with the loan
proceeds and will be repaid by the ESOP with funds from the Bank's discretionary
contributions to the ESOP and earnings on ESOP assets. The shares purchased with
the loan proceeds are held in a suspense account for allocation among
participants as the loan is repaid. As payments are made and the shares are
released from the suspense account, such shares will be validly issued, fully
paid and nonassessable.
Shares pledged as collateral are reported as unearned ESOP shares in the
Consolidated Balance Sheet. As shares are released from collateral, the
Corporation reports compensation expense equal to the current market price of
the shares, and the shares become outstanding for earnings per share
computations. Dividends on allocated ESOP shares are recorded as a reduction of
retained earnings while dividends on unallocated ESOP shares are recorded as a
reduction of debt and accrued interest. ESOP compensation expense was $44,955
for the three months ended September 30, 1998. The ESOP shares at September 30,
1998 and June 30, 1998 were as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
---- ----
<S> <C> <C>
Allocated shares 11,157 --
Shares committed to be released for allocation 3,832 11,991
Unreleased shares 164,871 167,869
---------- ----------
Total ESOP shares 179,860 179,860
========== ==========
Fair value of unreleased shares $2,143,323 $2,476,068
========== ==========
</TABLE>
- --------------------------------------------------------------------------------
14.
<PAGE> 15
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
INTRODUCTION
In the following pages, management presents an analysis of the financial
condition of Home Loan Financial Corporation as of September 30, 1998 compared
to June 30, 1998, and results of operations for the three months ended September
30, 1998 compared with the same period in 1997. This discussion is designed to
provide a more comprehensive review of the operating results and financial
position than could be obtained from an examination of the financial statements
alone. This analysis should be read in conjunction with the interim financial
statements and related footnotes included herein.
FORWARD LOOKING STATEMENTS
When used in this discussion or future filings by the Corporation with the
Securities and Exchange Commission, or other public or shareholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," "believe" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The Corporation
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made, and to advise
readers that various factors, including regional and national economic
conditions, changes in levels of market interest rates, credit risks of lending
activities and competitive and regulatory factors, could affect the
Corporation's financial performance and could cause the Corporation's actual
results for future periods to differ materially from those anticipated or
projected.
The Corporation is not aware of any trends, events or uncertainties that will
have or are reasonably likely to have a material effect on its liquidity,
capital resources or operations except as discussed herein. The Corporation is
not aware of any current recommendations by regulatory authorities that would
have such effect if implemented.
The Corporation does not undertake, and specifically disclaims, any obligation
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect occurrence of anticipated or unanticipated
events or circumstances after the date of such statements.
- --------------------------------------------------------------------------------
15.
<PAGE> 16
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
Total assets at September 30, 1998 were $84.7 million compared to $81.9 million
at June 30, 1998, an increase of $2.8 million, or 3.4%. The increase in total
assets was primarily in loans. Loan growth, which totaled $3.7 million,
consisted primarily of one- to four-family residential real estate loans, which
increased $1.7 million, and commercial loans, which increased $0.5 million.
Consumer loans represented 15.5% and 16.1%of gross loans at September 30, 1998
and June 30, 1998. These increases reflect a stable local economy coupled with
the interest rate environment during the period.
Total deposits increased $0.3 million, from $48.5 million at June 30, 1998 to
$48.8 million at September 30, 1998. The Corporation experienced an increase in
negotiable order of withdrawal ("NOW") accounts, money market accounts and
noninterest-bearing demand deposit accounts of $0.5 million partially offset by
a decrease in savings deposits of $0.2 million. The certificates of deposit
portfolio as a percent of total deposits remained almost unchanged from June 30,
1998 to September 30, 1998. Almost all certificates of deposit mature in less
than three years with the majority maturing in the next year.
As an additional source of liquidity, the Bank maintains a $5 million cash
management line of credit with the Federal Home Loan Bank of Cincinnati. There
were no borrowings outstanding on this line of credit at September 30, 1998 or
June 30, 1998. The Bank had a $1.0 million fixed-rate borrowing, with an
interest rate of 5.66%, at June 30, 1998, and an additional $2.0 million
fixed-rate borrowing, with an interest rate of 5.18%, resulting in total
borrowings of $3.0 million at September 30, 1998. The interest rates on these
borrowing are fixed for five years, then convertible to variable rates at the
option of the FHLB. If the convertible option is exercised, the advance may be
prepaid without penalty. The original terms of these borrowings are 120 months
with interest due monthly and principal due upon maturity in 2008. In the recent
past, the Corporation had not aggressively marketed or priced fixed-rate
mortgages due to the interest rate risk exposure. However, to better utilize the
excess capital of the Corporation, management intends to be more competitive
with this product. As a result, the Corporation borrowed funds from the FHLB to
mitigate the interest rate exposure of originating fixed-rate loans.
RESULTS OF OPERATIONS
General economic conditions, the monetary and fiscal policies of federal
agencies and the regulatory policies of agencies that regulate financial
institutions affect the operating results of the Corporation. Interest rates on
competing investments and general market rates of interest influence the
Corporation's cost of funds. Lending activities are influenced by the demand for
real estate loans and other types of loans, which in turn is affected by the
interest rates at which such loans are made, general economic conditions and the
availability of funds for lending activities.
- --------------------------------------------------------------------------------
16.
<PAGE> 17
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The Corporation's net income primarily depends on its net interest income, which
is the difference between the interest income earned on interest-earning assets,
such as loans and securities, and interest expense incurred on interest-bearing
liabilities, such as deposits and borrowings. The level of net interest income
is dependent on the interest rate environment and the volume and composition of
interest-earning assets and interest-bearing liabilities. Provisions for loan
losses, service charges, gains on the sale of assets, other income, noninterest
expense and income taxes also affect net income.
Net income was $392,518 for the three months ended September 30, 1998, compared
to $213,170 for the three months ended September 30, 1997. The increase in net
income for the three months ended September 30, 1998 was the result of an
increase in net interest income partially offset by an increase in noninterest
expense.
Net interest income totaled $1,079,164 for the three months ended September 30,
1998, as compared to $737,031 for the three months ended September 30, 1997,
representing an increase of $342,133, or 46.4%. The change in net interest
income is attributable to a large increase in the ratio of average
interest-earning assets to average interest-bearing liabilities for the
comparable periods due to the funds from the conversion partially offset by a
decrease in the interest rate spread.
Interest and fees on loans increased $179,316, or 15.8%, from $1,137,188 for the
three months ended September 30, 1997 to $1,316,504 for the three months ended
September 30, 1998. The increase was due to higher average balance of loans.
Interest earned on securities totaled $208,445 for the three months ended
September 30, 1998, as compared to $74,490 for the three months ended September
30, 1997. The increase was a result of higher average balances of securities
partially offset by a decrease in the yield earned.
Interest on interest-bearing deposits and overnight deposits increased $56,301
from $35,584 for the three months ended September 30, 1997 to $91,885 for the
three months ended September 30, 1998. This increase was the result of higher
average balances of interest-bearing deposits and overnight funds.
Dividends on Federal Home Loan Bank (FHLB) stock increased slightly for the
three months ended September 30, 1998, compared to the three months ended
September 30, 1997, primarily due to an increase in the number of shares of FHLB
stock owned.
Interest paid on deposits increased $8,219 for the three months ended September
30, 1998, compared to the three months ended September 30, 1997. The increase in
interest expense was due to an increase in the cost of funds partially offset by
a slight decrease in the average balances of deposits. The increase in the cost
of funds was primarily due to management increasing the rate paid on money
market accounts to be more competitive and grow this product.
- --------------------------------------------------------------------------------
17.
<PAGE> 18
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Interest on Federal Home Loan Bank advances totaled $19,714 for the three months
ended September 30, 1998. The Corporation had no borrowings for the three months
ended September 30, 1997. The borrowings in 1998 were used to provide funding
for fixed-rate loan demand.
The Corporation maintains an allowance for loan losses in an amount that, in
management's judgment, is adequate to absorb reasonably foreseeable losses
inherent in the loan portfolio. While management utilizes its best judgment and
information available, the ultimate adequacy of the allowance is dependent on a
variety of factors, including the performance of the loan portfolio, the
economy, changes in real estate values and interest rates and the view of the
regulatory authorities toward loan classifications. The provision for loan
losses is determined by management as the amount to be added to the allowance
for loan losses after net charge-offs have been deducted to bring the allowance
to a level which is considered adequate to absorb reasonably foreseeable losses
inherent in the loan portfolio. The amount of the provision is based on
management's monthly review of the loan portfolio and consideration of such
factors as historical loss experience, general prevailing economic conditions,
changes in the size and composition of the loan portfolio and specific borrower
considerations, including the ability of the borrower to repay the loan and the
estimated value of the underlying collateral.
The provision for loan losses totaled $30,000 for the three months ended
September 30, 1998 and 1997. The Corporation has not experienced significant net
charge-offs in any of the periods presented. The Corporation's low historical
charge-off history is the product of a variety of factors, including the
Corporation's underwriting guidelines, which generally require a loan-to-value
or projected completed value ratio of 80% for the purchase or construction of
one- to four-family residential properties and 75% for commercial real estate
and land loans, established income information and defined ratios of debt to
income. The allowance for loan losses totaled $253,606, or 0.42% of total loans,
net of loans in process and net deferred loan fees and costs at September 30,
1998, compared with $223,237, or 0.39%, at June 30, 1998. The allowance as a
percentage of loans increase was primarily due to growth in the commercial loan
portfolio.
Noninterest income includes service fees and other miscellaneous income. For the
three months ended September 30, 1998 noninterest income totaled $50,656
compared to $43,347 for the three months ended September 30, 1997. During the
1998 period, the Corporation experienced increases in service charges and fees
and miscellaneous operating income.
Noninterest expense totaled $487,702 for the three months ended September 30,
1998 compared to $415,108 for same period in 1997. This increase was due
primarily to increases in compensation and benefits, computer processing and
other expense. The increase in compensation and benefits was the result of
normal, annual merit increases and the establishment of the Corporation's ESOP.
The volatility of income tax expense is primarily attributable to the change in
net income before income taxes. The provision for income taxes totaled $219,600
for the three months ended September 30, 1998 compared to $122,100 for the three
months ended September 30, 1997.
- --------------------------------------------------------------------------------
18.
<PAGE> 19
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's liquidity, primarily represented by cash and cash equivalents,
is a result of its operating, investing and financing activities. These
activities are summarized below for the three months ended September 30, 1998
and 1997.
<TABLE>
<CAPTION>
Three Months
Ended September 30,
-------------------------------
1998 1997
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Net income $ 393 $ 213
Adjustments to reconcile net income to net cash from
operating activities 13 333
------------ ------------
Net cash from operating activities 406 546
Net cash from investing activities (3,610) (2,015)
Net cash from financing activities 2,176 (1,028)
------------ ------------
Net change in cash and cash equivalents (1,028) (2,497)
Cash and cash equivalents at beginning of period 7,657 4,681
------------ ------------
Cash and cash equivalents at end of period $ 6,629 $ 2,184
============ ============
</TABLE>
The Corporation's principal sources of funds are deposits, loan repayments,
maturities of securities, and other funds provided by operations. The
Corporation also has the ability to borrow from the FHLB. While scheduled loan
repayments and maturing securities are relatively predictable, deposit flows and
early loan prepayments are influenced by interest rates, general economic
conditions, and competition. The Corporation maintains investments in liquid
assets based on management's assessment of (1) need for funds, (2) expected
deposit flows, (3) yields available on short-term liquid assets and (4)
objectives of the asset/liability management program.
Office of Thrift Supervision ("OTS") regulations presently require the Bank to
maintain an average daily balance of investments in United States Treasury,
federal agency obligations and other investments having maturities of five years
or less in an amount equal to 4% of the sum of the Bank's average daily balance
of net withdrawable deposit accounts and borrowings payable in one year or less.
The liquidity requirement, which may be changed from time to time by the OTS to
reflect changing economic conditions, is intended to provide a source of
relatively liquid funds on which the Bank may rely, if necessary, to fund
deposit withdrawals or other short-term funding needs. At September 30, 1998,
the Bank's regulatory liquidity was 28.05%. At such date, the Corporation had
commitments to originate variable rate residential real estate mortgage loans
totaling $816,000 and fixed rate residential real estate mortgage loans totaling
$191,000. Loan commitments are generally for 30 days. The Corporation considers
its liquidity and capital reserves sufficient to meet its outstanding short- and
long-term needs. See Note 5 of the Notes to Consolidated Financial Statements.
- --------------------------------------------------------------------------------
19.
<PAGE> 20
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The Bank is required by regulations to meet certain minimum capital
requirements, which must be generally as stringent as the requirements
established for commercial banks. Failure to meet minimum capital requirements
can initiate certain mandatory actions that, if undertaken, could have a direct
material affect on the Bank's financial statements. Current capital requirements
call for tangible capital of 1.5% of adjusted total assets, core capital (which,
for the Bank, consists solely of tangible capital) of 3.0% of adjusted total
assets and risk-based capital (which, for the Bank, consists of core capital and
general valuation allowances) of 8.0% of risk-weighted assets (assets are
weighted at percentage levels ranging from 0% to 100% depending on their
relative risk). The following table indicates that the requirement for core
capital is 4.0% because that is the level that the OTS prompt corrective action
regulations require to be considered adequately capitalized. At September 30,
1998, and June 30, 1998, the Bank complies with all regulatory capital
requirements. Based on the Bank's computed regulatory capital ratios, the Bank
is considered well capitalized under the applicable requirements at September
30, 1998 and June 30, 1998. Management is not aware of any matter subsequent to
September 30, 1998 that would cause the Bank's capital category to change.
At September 30, 1998, and June 30, 1998 the Bank's actual capital levels and
minimum required levels were:
<TABLE>
<CAPTION>
Minimum Minimum
Required To Be Required To Be
Adequately Capitalized Well Capitalized
Under Prompt Corrective Under Prompt Corrective
Actual Action Regulations Action Regulations
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1998
Total capital (to risk-
weighted assets) $ 21,137 49.4% $ 3,423 8.0% $ 4,279 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 20,883 48.9 1,712 4.0 2,567 6.0
Tier 1 (core) capital (to
adjusted total assets) 20,883 24.7 3,385 4.0 4,231 5.0
Tangible capital (to
adjusted total assets) 20,883 24.7 1,269 1.5 N/A
JUNE 30, 1998
Total capital (to risk-
weighted assets) $ 20,749 51.3% $ 3,238 8.0% $ 4,407 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 20,526 50.7 1,619 4.0 2,428 6.0
Tier 1 (core) capital (to
adjusted total assets) 20,526 25.1 3,278 4.0 4,098 5.0
Tangible capital (to
adjusted total assets) 20,526 25.1 1,299 1.5 N/A
</TABLE>
- --------------------------------------------------------------------------------
20.
<PAGE> 21
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
In addition to certain federal income tax considerations, OTS regulations impose
limitations on the payment of dividends and other capital distributions by
savings associations. Under OTS regulations applicable to converted savings
associations, the Bank is not permitted to pay a cash dividend on its common
shares if its regulatory capital would, as a result of payment of such
dividends, be reduced below the amount required for the Liquidation Account, or
below applicable regulatory capital requirements prescribed by the OTS.
OTS regulations applicable to all savings and loan associations provide that a
savings association which immediately prior to, and on a pro forma basis after
giving effect to, a proposed capital distribution (including a dividend) has
total capital (as defined by OTS regulations) that is equal to or greater than
the amount of its capital requirements is generally permitted without OTS
approval (but subsequent to 30 days' prior notice to the OTS) to make capital
distributions, including dividends, during a calendar year in an amount not to
exceed the greater of (1) 100% of its net earnings to date during the calendar
year, plus an amount equal to one-half of the amount by which its total capital
to assets ratio exceeded its required capital to assets ratio at the beginning
of the calendar year, or (2) 75% of its net earnings for the most recent
four-quarter period. Savings associations that meet the capital requirements but
have been notified by the OTS that they are in need of more than normal
supervision will be subject to restrictions on dividends. A savings association
that fails to meet current minimum capital requirements is prohibited from
making any capital distributions without the prior approval of the OTS.
The Bank currently meets all of its capital requirements and, unless the OTS
determines that the Bank is an institution requiring more than normal
supervision, the Bank may pay dividends in accordance with the foregoing
provisions of OTS regulations.
In October 1998, the Bank agreed to acquire real estate in West Lafayette, Ohio
and announced plans to construct a new, full-service branch banking office. The
total projected cost of the branch banking office is expect to be $782,000. As
of September 30, 1998 the Bank has not paid any costs related to this office.
In October 1998, the Board of Directors of the Corporation authorized the
purchase of 4% of the Corporation's outstanding common shares for the Home Loan
Financial Corporation's Recognition and Retention Plan which was approved by
shareholders at the Corporation's October 12, 1998 Annual Meeting. Additionally
in October 1998, the Board of Directors of the Corporation authorized the
purchase of up to 5% of the Corporation's outstanding common shares over a
six-month period. As of October 31, 1998, 60,000 shares have been purchased for
the Recognition and Retention Plan. No shares have purchased under the 5%
repurchase.
- --------------------------------------------------------------------------------
21.
<PAGE> 22
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
YEAR 2000 CONSIDERATIONS
The Bank's lending and deposit activities are almost entirely dependent upon
computer systems which process and record transactions, although the Bank can
effectively operate with manual systems for brief periods when its electronic
systems malfunction or cannot be accessed. The Bank utilizes the services of a
nationally-recognized data processing service bureau which specializes in data
processing for financial institutions. In addition to its basic operating
activities, the Bank's facilities and infrastructure, such as security systems
and communications equipment, are dependent to varying degrees upon computer
systems.
The Bank is aware of the potential Year 2000 related problems that may affect
the computers which control or operate the Bank's operating systems, facilities
and infrastructure. In 1997, the Bank began the process of identifying any Year
2000 related problems that may be experienced by its computer-operated or
- -dependent systems. The Bank has contacted the companies that supply or service
the Bank's computer-operated or -dependent systems to obtain confirmation that
each such system that is material to the operations of the Bank is either
currently Year 2000 compliant or is expected to be Year 2000 compliant. With
respect to systems that cannot presently be confirmed as Year 2000 compliant,
the Bank will continue to work with the appropriate supplier or servicer to
ensure that all such systems will be rendered compliant in a timely manner, with
minimal expense to the Bank or disruption of the Bank's operations. If, by
December 31, 1998, any of the Bank's suppliers or servicers is unable to certify
Year 2000 compliance with respect to any systems the failure of which would have
a material adverse effect on the Bank's operations, financial condition or
results, the Bank would then have sufficient time to identify and contract with
suppliers and servicers who are able to certify Year 2000 compliance. The Bank
has also identified two companies whose services are deemed critical to the
mission of the Bank and received assurances that such companies will be Year
2000 compliant. As a contingency plan, however, the Bank has determined that if
such service providers were to have their systems fail, the Bank would implement
manual systems until such systems could be re-established. The Bank does not
anticipate that such short-term manual systems would have a material adverse
effect on the Bank's operations. The expense of such a change in suppliers or
servicers is not expected to be material to the Bank. The Bank has examined its
computer hardware and software and determined that it will cost approximately
$15,000 to make such systems Year 2000 compliant. At this time, however, any
additional expense that may be incurred by the Bank in connection with Year 2000
issues cannot be determined.
In addition to possible expense related to its own systems, the Bank could incur
losses if loan payments are delayed due to Year 2000 problems affecting any of
the Bank's significant borrowers or impairing the payroll systems of large
employers in the Bank's primary market area. Because the Bank's loan portfolio
is highly diversified with regard to individual borrowers and types of
businesses and the Bank's primary market area is not significantly dependent
upon one employer or industry, the Bank does not expect any significant or
prolonged Year 2000 related difficulties that will affect net earnings or cash
flow.
- --------------------------------------------------------------------------------
22.
<PAGE> 23
HOME LOAN FINANCIAL CORPORATION
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On October 12, 1998, the Annual Meeting of the Shareholders of the
Corporation was held. The following members of the Board of Directors
of the Corporation were reelected by the votes set forth below for
terms expiring in 1999:
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
Neal J. Caldwell 1,991,590 24,068
Charles H. Durmis 1,998,115 17,543
Robert C. Hamilton 1,998,490 17,168
Robert D. Mauch 1,998,065 17,593
Douglas L. Randles 1,998,065 17,593
</TABLE>
These other matters submitted to the Shareholders, for which the
following votes were cast:
1. The approval of the Home Loan Financial Corporation 1998 Stock
Option and Incentive Plan.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
<S> <C> <C> <C> <C>
1,560,124 72,281 10,979 372,274
</TABLE>
2. The approval of the Home Loan Financial Corporation Recognition
and Retention Plan and Trust Agreement.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
<S> <C> <C> <C> <C>
1,543,634 93,406 11,279 367,339
</TABLE>
3. The ratification of the selection of Crowe, Chizek and Company
LLP as the auditors of Home Loan Financial Corporation for the
current fiscal year.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
1,990,006 14,947 10,705
</TABLE>
- --------------------------------------------------------------------------------
23.
<PAGE> 24
HOME LOAN FINANCIAL CORPORATION
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibit No. 27: Financial Data Schedule
(b) No current reports on Form 8-K were filed by the small business
issuer during the quarter ended September 30, 1998.
- --------------------------------------------------------------------------------
24.
<PAGE> 25
HOME LOAN FINANCIAL CORPORATION
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirement of the Securities Exchange Act of 1934, the small
business issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
Date: November 11, 1998 /s/ Robert C. Hamilton
--------------------------- ----------------------
Robert C. Hamilton
President and Chief Executive Officer
Date: November 11, 1998 /s/ Preston W. Bair
--------------------------- -------------------
Preston W. Bair
Secretary, Treasurer and Chief
Financial Officer
</TABLE>
- --------------------------------------------------------------------------------
25.
<PAGE> 26
HOME LOAN FINANCIAL CORPORATION
INDEX TO EXHIBITS
- --------------------------------------------------------------------------------
EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER
- -------- ----------- -----------
27 Financial Data Schedule 27
- --------------------------------------------------------------------------------
26.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> $ 1,336
<INT-BEARING-DEPOSITS> 2,331
<FED-FUNDS-SOLD> 5,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,968
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 60,492
<ALLOWANCE> 254
<TOTAL-ASSETS> 84,691
<DEPOSITS> 48,826
<SHORT-TERM> 0
<LIABILITIES-OTHER> 932
<LONG-TERM> 3,000
0
0
<COMMON> 0
<OTHER-SE> 31,933
<TOTAL-LIABILITIES-AND-EQUITY> 84,691
<INTEREST-LOAN> 1,317
<INTEREST-INVEST> 215
<INTEREST-OTHER> 92
<INTEREST-TOTAL> 1,624
<INTEREST-DEPOSIT> 525
<INTEREST-EXPENSE> 545
<INTEREST-INCOME-NET> 1,079
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 488
<INCOME-PRETAX> 612
<INCOME-PRE-EXTRAORDINARY> 393
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 393
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
<YIELD-ACTUAL> 4.89
<LOANS-NON> 0
<LOANS-PAST> 54
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 223
<CHARGE-OFFS> 0
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 254
<ALLOWANCE-DOMESTIC> 254
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 49
</TABLE>
