<PAGE> 1
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 Quarterly Period ended March 31, 1998
[ ] 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 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 [ ] No [X]
As of May 11, 1998, the latest practical date, 2,248,250 of the issuer's common
shares, no par value, were issued and outstanding.
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<PAGE> 2
<TABLE>
HOME LOAN FINANCIAL CORPORATION
INDEX
<CAPTION>
Page
----
<S> <C>
PART I -FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (Unaudited)
Consolidated Balance Sheets ...................................... 3
Consolidated Statements of 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................ 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................ 24
Item 2. Changes in Securities and Use of Proceeds.................... 24
Item 3. Defaults Upon Senior Securities.............................. 24
Item 4. Submission of Matters to a Vote of Security Holders.......... 24
Item 5. Other Information............................................ 24
Item 6. Exhibits and Reports on Form 8-K............................. 24
SIGNATURES ..................................................................... 25
</TABLE>
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2.
<PAGE> 3
<TABLE>
HOME LOAN FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
- ---------------------------------------------------------------------------------------------
<CAPTION>
March 31, June 30,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,642,838 $ 1,765,821
Interest-bearing deposits in other banks 672,206 165,228
Overnight deposits 9,000,000 1,250,000
Federal funds sold 4,900,000 1,500,000
----------- -----------
Total cash and cash equivalents 17,215,044 4,681,049
Interest-bearing time deposits 2,040,506 38,796
Securities available for sale at fair value 4,264,141 5,004,296
Loans, net of allowance for loan losses 54,967,226 49,300,124
Premises and equipment, net 483,980 524,061
Federal Home Loan Bank stock 386,100 366,000
Accrued interest receivable 298,778 287,014
Other assets 117,457 199,505
----------- -----------
Total assets $79,773,232 $60,400,845
=========== ===========
LIABILITIES
Deposits $47,996,694 $49,235,430
Accrued interest payable 425,210 460,029
Accrued expenses and other liabilities 277,720 335,122
----------- -----------
Total liabilities 48,699,624 50,030,581
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 21,884,719 --
Retained earnings - substantially restricted 10,969,866 10,366,232
Unearned employee stock ownership plan shares (1,791,180) --
Net unrealized gain on securities available for sale,
net of tax 10,203 4,032
----------- -----------
Total shareholders' equity 31,073,608 10,370,264
----------- -----------
Total liabilities and shareholders' equity $79,773,232 $60,400,845
=========== ===========
</TABLE>
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See accompanying notes to consolidated financial statements.
3.
<PAGE> 4
<TABLE>
HOME LOAN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans, including fees $1,183,000 $1,034,788 $3,499,432 $3,059,329
Securities 65,618 55,186 208,124 189,091
Dividends on Federal Home Loan
Bank stock 6,782 6,102 20,279 18,222
Interest-bearing deposits and federal
funds sold 23,162 37,093 74,279 117,259
---------- ---------- ---------- ----------
Total interest income 1,278,562 1,133,169 3,802,114 3,383,901
INTEREST EXPENSE
Deposits 544,745 476,074 1,584,227 1,408,337
Federal Home Loan Bank advances 9,782 -- 16,363 --
---------- ---------- ---------- ----------
Total interest expense 554,527 476,074 1,600,590 1,408,337
---------- ---------- ---------- ----------
NET INTEREST INCOME 724,035 657,095 2,201,524 1,975,564
Provision for loan losses 30,000 1,500 90,000 4,500
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 694,035 655,595 2,111,524 1,971,064
NONINTEREST INCOME
Service charges and other fees 32,659 33,031 98,488 104,963
Other income 9,837 9,990 30,822 26,309
---------- ---------- ---------- ----------
Total noninterest income 42,496 43,021 129,310 131,272
NONINTEREST EXPENSE
Salaries and employee benefits 270,580 227,465 745,660 661,175
Occupancy and equipment 36,733 35,909 107,013 108,257
State franchise taxes 36,900 35,100 110,700 105,300
Computer processing 28,935 26,819 77,703 71,706
SAIF deposit insurance premiums 7,423 7,346 22,644 313,399
Legal, audit and supervisory exam fees 17,400 19,908 52,876 51,746
Director fees 21,625 17,925 60,625 59,985
Other expense 43,831 79,228 131,179 156,000
---------- ---------- ---------- ----------
Total noninterest expense 463,427 449,700 1,308,400 1,527,568
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 273,104 248,916 932,434 574,768
Income tax expense 91,300 87,000 328,800 197,800
---------- ---------- ---------- ----------
NET INCOME $ 181,804 $ 161,916 $ 603,634 $ 376,968
========== ========== ========== ==========
EARNINGS PER COMMON SHARE $ -- $ N/A $ -- $ N/A
========== ========== ========== ==========
</TABLE>
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See accompanying notes to consolidated financial statements.
4.
<PAGE> 5
<TABLE>
HOME LOAN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY Nine months ended March 31, 1998 and 1997
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
Unrealized
Gain (Loss) on
Additional Unearned Available
Paid-In Retained ESOP for Sale
Capital Earnings Shares Securities Total
------- -------- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at
July 1, 1997 $ -- $ 9,770,984 $ -- $ (2,888) $ 9,768,096
Net income for
the period -- 376,968 -- (7,258) 376,968
----------- ----------- ----------- -------- -----------
Balance at
March 31,1997 $ -- $10,147,952 $ -- $(10,146) $10,145,064
=========== =========== =========== ======== ===========
Balance at
July 1, 1997 $ -- $10,366,232 $ -- $ 4,032 $10,370,264
Net income for
the period -- 603,634 -- -- 603,634
Sale of 2,248,250
shares of no par
common stock,
net of conversion
costs 21,880,273 -- -- -- 21,880,273
Shares purchased
under employee
stock ownership
plan -- -- (1,798,600) -- (1,798,600)
Commitment
to release
employee stock
ownership
plan shares 4,446 -- 7,420 -- 11,866
Change in
unrealized gain
on available
for sale securities -- -- -- 6,171 6,171
----------- ----------- ----------- -------- -----------
Balance at
March 31, 1998 $21,884,719 $10,969,866 $(1,791,180) $ 10,203 $31,073,608
=========== =========== =========== ======== ===========
</TABLE>
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See accompanying notes to consolidated financial statements.
5.
<PAGE> 6
<TABLE>
HOME LOAN FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- -------------------------------------------------------------------------------------------------------
<CAPTION>
Nine Months Ended
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 603,634 $ 376,968
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation 63,450 58,285
Securities amortization and accretion (394) 2,366
Provision for loan losses 90,000 4,500
FHLB stock dividends (20,100) (18,200)
Gain on sale of securities available for sale (121) --
Compensation expense on ESOP shares 11,866 --
Net change in accrued interest receivable and other assets 65,395 (103,064)
Net change in accrued expenses and other liabilities (92,221) (68,612)
Net change in deferred loan fees 6,495 4,332
----------- -----------
Net cash from operating activities 728,004 256,575
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Proceeds from maturities 750,020 250,000
Purchases -- (2,009,180)
Securities held to maturity:
Proceeds from maturities -- 2,000,000
Net change in loans (5,763,597) (3,802,276)
Purchase of FHLB term deposit (2,000,000) --
Premises and equipment expenditures (23,369) (76,629)
----------- -----------
Net cash from investing activities (7,036,946) (3,638,085)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits (1,238,736) 1,852,891
Proceeds from issuance of common stock,
net of conversion costs 21,880,273 --
Cash provided to ESOP (1,798,600) --
----------- -----------
Net cash from financing activities 18,842,937 1,852,891
----------- -----------
Net change in cash and cash equivalents 12,533,995 (1,528,619)
Cash and cash equivalents at beginning of period 4,681,049 5,723,439
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $17,215,044 $ 4,194,820
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 1,635,409 $ 1,487,718
Income taxes 402,849 230,000
</TABLE>
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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 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
March 31, 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 financial statements and notes
thereto of The Home Loan Savings Bank ("Bank") for the fiscal year ended June
30, 1997. The accounting policies of the Bank described in the notes to
financial statements contained in the Bank's June 30, 1997, 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 (the "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. The majority of the Bank's income is derived from
residential and consumer lending activities and investments.
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 collectibility of loans, fair values of financial instruments and status of
contingencies are particularly subject to change.
The provision for income taxes is based on the effective tax rate expected to be
applicable for the entire year. Income tax expense is the sum of the
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 basis
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.
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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)
In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share" which is
effective for periods ending after December 15, 1997, including interim periods.
SFAS No. 128 simplifies the calculation of earnings per share ("EPS") by
replacing primary EPS with basic EPS. It also requires dual presentation of
basic EPS and diluted EPS for entities with complex capital structures. Basic
EPS includes no dilution and is computed by dividing income available to common
shareholders by the weighted-average common shares outstanding for the period.
Diluted EPS reflects the potential dilution of securities that could share in
earnings such as stock options, warrants or other common stock equivalents. All
prior period EPS data must be restated to conform with the new presentation. The
Corporation currently has no common stock equivalents.
Earnings per common share is computed in accordance with SFAS No. 128. 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 periods ended March 31, 1998 was
computed based on net income of the Corporation since March 25, 1998. The
weighted average number of shares outstanding during the three and nine months
ended March 31, 1998 was 2,068,514. Unreleased ESOP shares are not considered to
be outstanding shares for the purpose of determining the weighted average number
of shares used in the earnings per common share calculation. Net income of the
Corporation subsequent to March 25, 1998 was $5,684 which results in earnings
per share of less than $.01. No earnings per common share is shown for the three
and nine months ended March 31, 1997, as prior to March 25, 1998, the Bank was a
mutual company. The financial information for the three and nine months ended
March 31, 1997 reflects the Bank prior to the conversion.
Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
was issued by the Financial Accounting Standards Board ("FASB") in 1996. It
revises the accounting for transfers of financial assets, such as loans and
securities, and for distinguishing between sales and secured borrowings. SFAS
No. 125 was originally effective for some transactions in 1997 and others in
1998. SFAS No. 127, "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125" which was issued in December 1996, defers for one year
the effective date of provisions related to securities lending, repurchase
agreements and other similar transactions. The remaining portions of SFAS 125
were effective January 1, 1997. SFAS No. 125 did not have a material impact on
the Corporation's financial statements.
SFAS No. 129, "Disclosures of Information about Capital Structure," became
effective for the Corporation as of December 31, 1997. SFAS No. 129 consolidated
existing accounting guidance relating to disclosure about a company's capital
structure. SFAS No. 129 did not affect the Corporation's disclosures.
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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)
In June 1997, the FASB issued 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
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. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required.
In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This Statement significantly changes the
way public business enterprises report information about operating segments in
annual financial statements, and requires those enterprises to 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, 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, the Statement requires significantly more information be disclosed for
each reportable segment than is presently being reported in annual financial
statements. The Statement also requires selected information be reported in
interim financial statements. SFAS No. 131 is effective for financial statements
for periods beginning after December 15, 1997. SFAS No. 131 is not expected to
have a significant impact on the Corporation.
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(Continued)
9.
<PAGE> 10
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
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 Holding Company'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
Holding Company were offered in accordance with the Plan of Conversion. A total
of 2,248,250 common shares of the Holding Company were sold at $10.00 per share
and net proceeds from the sale were $21,880,273 after deducting the costs of
conversion.
The Holding Company 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 Holding Company as a result of 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 are summarized as
follows:
<TABLE>
<CAPTION>
March 31, 1998
-------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Government agencies $4,248,681 $15,582 $122 $4,264,141
========== ======= ==== ==========
</TABLE>
<TABLE>
<CAPTION>
June 30, 1997
-------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Government agencies $4,998,188 $10,477 $4,369 $5,004,296
========== ======= ====== ==========
</TABLE>
The amortized cost and estimated fair values of securities, by contractual
maturity, are as follows at March 31, 1998:
Estimated
Amortized Fair
Cost Value
---- -----
Due in one year or less $3,499,970 $3,509,610
Due after one year through five years 748,711 754,531
---------- ----------
$4,248,681 $4,264,141
========== ==========
Actual maturities could differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties.
During the nine months ended March 31, 1998, 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 or nine months ended March 31, 1998 and 1997.
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(Continued)
11.
<PAGE> 12
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTE 4 - LOANS
Loans are summarized as follows:
March 31, June 30,
1998 1997
---- ----
Residential real estate loans:
1 - 4 family $38,474,859 $35,155,726
Home equity 1,430,089 728,416
Nonresidential real estate 4,008,065 3,297,105
Real estate construction 355,999 553,833
Land 478,863 570,542
----------- -----------
Total real estate loans 44,747,875 40,305,622
Consumer and other loans
Home improvement 4,306,515 3,701,588
Automobile 2,816,436 2,505,823
Commercial 1,328,652 1,645,091
Deposit 375,899 219,264
Credit card 382,805 346,704
Other 1,520,106 1,047,289
----------- -----------
Total consumer and other 10,730,413 9,465,759
----------- -----------
Total loans 55,478,288 49,771,381
Less:
Allowance for loan losses (198,344) (119,218)
Loans in process (199,424) (245,240)
Net deferred loan fees and costs (113,294) (106,799)
----------- -----------
$54,967,226 $49,300,124
=========== ===========
Activity in the allowance for loan losses is summarized as follows:
Three Months Nine Months
Ended March 31, Ended March 31,
--------------- ---------------
1998 1997 1998 1997
---- ---- ---- ----
Balance at beginning
of period $74,593 $120,513 $119,218 $117,513
Provision for losses 30,000 1,500 90,000 4,500
Charge-offs (6,808) -- (12,350) --
Recoveries 559 -- 1,476 --
------- -------- -------- --------
Balance at end of period $98,344 $122,013 $198,344 $122,013
======= ======== ======== ========
As of and for the three and nine months ended March 31, 1998 and 1997, no loans
were considered impaired within the scope of SFAS No. 114.
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(Continued)
12.
<PAGE> 13
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 5 - COMMITMENTS, OFF-BALANCE SHEET RISK AND CONTINGENCIES
There are various contingent liabilities that are not reflected in the 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,
more credit and interest-rate risk than the amount 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 follows:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
---- ----
<S> <C> <C>
Lines of credit - variable rate $1,831,000 $1,595,000
1-4 family residential real estate - variable rate 994,000 446,000
Commercial real estate - variable rate -- 700,000
Credit card arrangements - fixed rate 770,000 671,000
</TABLE>
Fixed rate commitments had an interest rate of 13.90% at March 31, 1998 and June
30, 1997. The interest rates on variable rate commitments range from 6.75% to
7.50% at March 31, 1998 and 8.00% to 9.50% at June 30, 1997.
- --------------------------------------------------------------------------------
(Continued)
13.
<PAGE> 14
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 6 - SAVINGS ASSOCIATION INSURANCE FUND RECAPITALIZATION
Included in SAIF deposit insurance premium expense in the Consolidated Statement
of Income for the nine months ended March 31, 1997 is $260,917 for a special
assessment resulting from legislation passed and enacted into law on September
30, 1996 to recapitalize the Savings Association Insurance Fund of the Federal
Deposit Insurance Corporation. Thrifts such as the Bank paid a one-time
assessment in November 1996 of $0.657 for each $100 in deposits as of March 31,
1995. Because of the recapitalization, the Bank began paying lower deposit
insurance premiums in January 1997.
NOTE 7 - EMPLOYEE STOCK OWNERSHIP PLAN
The Corporation has established 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. All dividends on
unallocated shares received by the ESOP are used to pay debt service. 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.
- --------------------------------------------------------------------------------
14.
<PAGE> 15
HOME LOAN FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 7 - EMPLOYEE STOCK OWNERSHIP PLAN (Continued)
The Corporation accounts for its ESOP in accordance with Statement of Position
93-6. Accordingly, the 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; dividends on unallocated ESOP shares are
recorded as a reduction of debt and accrued interest. ESOP compensation expense
was $11,866 for the three and nine months ended March 31, 1998. The ESOP shares
as of March 31, 1998 were as follows:
Shares committed to be released for allocation 742
Unreleased shares 179,118
----------
Total ESOP shares 179,860
==========
Fair value of unreleased shares at March 31, 1998 $2,821,108
==========
NOTE 8 - EMPLOYMENT AGREEMENT
The Bank has entered into an employment agreement with an officer of the
Corporation and the Bank. The agreement provides for a term of three years and
an annual salary and performance review by the Board of Directors, as well as
inclusion of the employee in any formally established employee benefit, bonus,
pension and profit-sharing plans for which senior management personnel are
eligible. The agreement provides for extensions for a period of one year on each
annual anniversary date, subject to review and approval of the extension by
disinterested members of the Board of Directors of the Bank. The employment
agreement also provides for vacation and sick leave.
- --------------------------------------------------------------------------------
15.
<PAGE> 16
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 March 31, 1998 compared to
June 30, 1997, and results of operations for the three and nine months ended
March 31, 1998 compared with the same periods 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.
In addition to the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Economic circumstances, the Corporation's operations and actual
results could differ significantly from those discussed in the forward-looking
statements. Some of the factors that could cause or contribute to such
differences are discussed herein but also include changes in the economy and
interest rates in the nation and the Bank's general market area.
FINANCIAL CONDITION
Total assets at March 31, 1998 were $79.8 million compared to $60.4 million at
June 30, 1997, an increase of $19.4 million, or 32.1%. The increase in total
assets was primarily the result of cash received from the conversion from a
state charted mutual savings and loan to a state charted stock savings and loan
with concurrent formation of a holding company. The majority of the proceeds
from the conversion were temporarily invested in overnight deposits, federal
funds sold and interest-bearing time deposits at other financial institutions.
Subsequent to March 31, 1998, the conversion proceeds were invested in U.S.
Treasury and Government agency securities with relatively short-term maturities.
Management's strategy emphasized investing in securities guaranteed by the U.S.
Government and its agencies as a means to mitigate credit risk. The investment
strategy also includes selecting securities with varying maturities to provide a
cash flow stream to fund future loan demand or operations or for reinvestment at
a later date. Loan growth, which totaled $5.7 million, consisted primarily of
one- to four-family residential real estate loans, which increased $3.3 million,
home equity loans, which increased $702,000, and consumer and other loans, which
increased $1.3 million. These increases are reflective of a stable local economy
coupled with the interest rate environment during the period.
The largest change in the consumer loan portfolio between June 30, 1997 and
March 31, 1998 was in home improvement loans which increased $605,000. Consumer
and other loans represented 19.3% and 19.0% of gross loans at March 31, 1998 and
June 30, 1997.
- --------------------------------------------------------------------------------
16.
<PAGE> 17
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Total deposits decreased $1.2 million, from $49.2 million at June 30, 1997 to
$48.0 million at March 31, 1998. The Corporation experienced a decrease in
certificates of deposit of $3.2 million and in savings deposits of $877,000
partially offset by an increase in negotiable order of withdrawal ("NOW")
accounts, money market accounts and noninterest-bearing demand deposit accounts
of $2.8 million. The certificates of deposit portfolio as a percent of total
deposits decreased from 59.3% at June 30, 1997 to 54.3% at March 31, 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 arrangement with the Federal Home Loan Bank of Cincinnati. There were
no advances outstanding at March 31, 1998 or June 30, 1997. Although no
borrowings were outstanding at March 31, 1998, the Bank did have advances during
the three and nine months ended March 31, 1998 to meet short-term liquidity
needs prior to the consummation of the conversion. Additional advances may be
obtained from the Federal Home Loan Bank to fund future loan growth and
liquidity as needed.
RESULTS OF OPERATIONS
The 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.
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 $182,000 and $604,000 for the three and nine months ended March
31, 1998, compared to $162,000 and $377,000 for the three and nine months ended
March 31, 1997. The increase in net income for the three months ended March 31,
1998 was the result of an increase in net interest income partially offset by a
higher provision for loan losses and higher noninterest expense. The increase in
net income for the nine months ended March 31, 1998 was primarily the result of
an increase in noninterest income and a special deposit insurance
- --------------------------------------------------------------------------------
17.
<PAGE> 18
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
assessment, as more fully discussed below, both partially offset by a higher
provision for loan losses.
Net interest income totaled $724,000 and $2,202,000 for the three and nine
months ended March 31, 1998, as compared to $657,000 and $1,976,000 for the
three and nine months ended March 31, 1997, representing increases of $67,000,
or 10.2%, and $226,000, or 11.4%. The change in net interest income is
attributable to an increase in the interest rate spread combined with a slight
increase in the ratio of average interest-earning assets to average
interest-bearing liabilities.
Interest and fees on loans increased approximately $148,000 and $440,000, or
14.3% and 14.4%, from $1,035,000 and $3,059,000 for the three and nine months
ended March 31, 1997 to $1,183,000 and $3,499,000 for the three and nine months
ended March 31, 1998. The increase in interest income was due to higher average
balance of loans.
Interest earned on securities totaled $66,000 and $208,000 for the three and
nine months ended March 31, 1998, as compared to $55,000 and $189,000 for the
three and nine months ended March 31, 1997. The increase was a result of higher
average balances of securities combined with an increased yield earned.
Interest on interest-bearing deposits and overnight deposits decreased
approximately $14,000 and $43,000 for the three and nine months ended March 31,
1998, as compared to the three and nine months ended March 31, 1997. The decline
was the result of lower average balances of interest-bearing deposits and
overnight funds.
Dividends on Federal Home Loan Bank (FHLB) stock increased slightly for the
three and nine months ended March 31, 1998, compared to the three and nine
months ended March 31, 1997, primarily due to an increase in the number of
shares of FHLB stock owned.
Interest paid on deposits increased approximately $69,000 and $176,000 for the
three and nine months ended March 31, 1998, compared to the three and nine
months ended March 31, 1997. The increase in interest expense was due to an
increase in the cost of funds combined with an increase in the average balances
of deposits.
Interest on Federal Home Loan Bank advances totaled $10,000 and $16,000 for the
three and nine months ended March 31, 1998. The Corporation borrowed funds for
the first time from the Federal Home Loan Bank of Cincinnati during fiscal 1998.
The borrowings were used as a source of short-term liquidity to provide funding
for loan demand prior to the consummation of the conversion.
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
- --------------------------------------------------------------------------------
18.
<PAGE> 19
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
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 for the three and nine months ended March 31, 1998
totaled $30,000 and $90,000 compared to $2,000 and $5,000 for the three and nine
months ended March 31, 1997, representing increases of $28,000 and $85,000. 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. In spite of the low historical
charge-off history, management increased the allowance for loan losses due to
growth of the total loan portfolio; an increase in nonresidential real estate
and consumer loans compared to the total portfolio; and, management's decision
to raise the nonspecific percentage allocation for higher risk, nonresidential
real estate loans. Previously, the same percentage allocation was used for
nonspecific reserves on nonresidential and residential real estate loans. The
allowance for loan losses totaled $198,000, or .36% of gross loans at March 31,
1998, compared with $121,000, or .24% of gross loans at June 30, 1997.
Noninterest income includes service fees and other miscellaneous income. For the
three and nine months ended March 31, 1998, noninterest income totaled $42,000
and $129,000 compared to $43,000 and $131,000 for the three and nine months
ended March 31, 1997. During the 1998 periods, the Corporation experienced a
slight decrease in service charges and fees which was partially offset by an
increase in miscellaneous operating income.
Noninterest expense remained relatively stable at $463,000 for the three months
ended March 31, 1998 compared to $450,000 for same period in 1997, while
decreasing $219,000 from $1,528,000 for the nine months ended March 31, 1997 to
$1,308,000 for the nine months ended March 31, 1998. During the comparable
three-month periods, an increase in compensation and benefits was partially
offset by a decrease in other expense. The increase in compensation and benefits
was the result of normal, annual merit increases, additional personnel and the
establishment of the Corporation's ESOP.
The decrease in noninterest expense during the comparable nine month periods was
due to a special deposit insurance assessment of $261,000 resulting from
legislation passed and enacted
- --------------------------------------------------------------------------------
19.
<PAGE> 20
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
into law on September 30, 1996 to recapitalize the SAIF. The legislation called
for a one-time assessment of $0.657 for each $100 in deposits held as of March
31, 1995. Because of the recapitalization of the SAIF, the disparity between
Bank and thrift insurance assessments was reduced. Thrifts had been paying
assessments of $.23 per $100 of deposits, which, for most thrifts, was reduced
to $.064 per $100 in deposits in January 1997 and will be reduced to $.024 per
$100 in deposits by no later than January 2000. The decrease in SAIF deposit
insurance premiums was partially offset by an increase in salaries and employee
benefits which resulted for the same reasons as previously discussed.
The volatility of income tax expense is primarily attributable to the change in
net income before income taxes. The provision for income taxes totaled $91,000
and $329,000 for the three and nine months ended March 31, 1998 compared to
$87,000 and $198,000 for the three and nine months ended March 31, 1997. The
decrease in tax expense for the comparable nine month periods was largely due to
the tax effect of $(89,000) for the special assessment discussed above.
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 nine months ended March 31, 1998 and
1997.
<TABLE>
<CAPTION>
Nine Months
Ended December 31,
----------------------
1998 1997
------- -------
(Dollars in thousands)
<S> <C> <C>
Net income $ 604 $ 377
Adjustments to reconcile net income to net cash from
operating activities 124 (120)
------- -------
Net cash from operating activities 728 257
Net cash from investing activities (7,037) (3,638)
Net cash from financing activities 18,843 1,853
------- -------
Net change in cash and cash equivalents 12,534 (1,528)
Cash and cash equivalents at beginning of period 4,681 5,723
------- -------
Cash and cash equivalents at end of period $17,215 $ 4,195
======= =======
</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
- --------------------------------------------------------------------------------
20.
<PAGE> 21
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
flows, (3) yields available on short-term liquid assets and (4) objectives of
the asset/liability management program.
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 March 31, 1998, the Bank's regulatory liquidity was 20.4%. At such
date, the Corporation had commitments to originate variable rate residential
real estate mortgage loans totaling $994,000. 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.
The Bank is subject to various regulatory capital requirements administered by
federal regulatory agencies. 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. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines involving quantitative measures of the
Bank's assets, liabilities and certain off-balance sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classifications are also subject to qualitative judgments by regulators about
the Bank's components, risk weightings and other factors. At March 31, 1998, and
June 30, 1997, 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 March 31, 1998 and June 30,
1997. Management is not aware of any matter subsequent to March 31, 1998 that
would cause the Bank's capital category to change.
- --------------------------------------------------------------------------------
21.
<PAGE> 22
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
At March 31, 1998, and June 30, 1997 the Bank's actual capital levels and
minimum required levels were:
<TABLE>
<CAPTION>
Minimum
Required To Be
Minimum Required Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
MARCH 31, 1998
Total capital (to risk-
weighted assets) $20,320 49.2% $3,303 8.0% $4,128 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 20,122 48.7 1,651 4.0 2,477 6.0
Tier 1 (core) capital (to
adjusted total assets) 20,122 25.2 2,394 3.0 3,989 5.0
Tangible capital (to
adjusted total assets) 20,122 25.2 1,197 1.5 N/A
JUNE 30, 1997
Total capital (to risk-
weighted assets) $10,485 30.7% $2,736 8.0% $3,420 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 10,366 30.3 1,368 4.0 2,052 6.0
Tier 1 (core) capital (to
adjusted total 10,366 17.2 1,812 3.0 3,020 5.0
Tangible capital (to
adjusted total assets) 10,366 17.2 906 1.5 N/A
</TABLE>
In addition to certain federal income considerations, the Office of Thrift
Supervision ("OTS") regulations impose limitations on 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) 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 it is required capital to assets ratio at the beginning
of the calendar year, or (2) 75% of its net earnings for the
- --------------------------------------------------------------------------------
22.
<PAGE> 23
HOME LOAN FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
most recent four-quarter period. A savings association failing 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 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.
At March 31, 1998, the Bank had no material commitments for capital
expenditures.
YEAR 2000 ISSUE
The Corporation's operations, like those of most financial institutions, depend
almost entirely on computer systems. The Corporation is addressing the potential
problems associated with the possibility that the computers which control or
operate the Corporation's operating systems, facilities and infrastructure may
not be programmed to read four-digit date codes and, upon arrival of the Year
2000, may recognized the two-digit code "00" as the year 1900, causing systems
to fail to function or to generate erroneous data. The Corporation is working
with the companies that supply or service its computer-operated or -dependent
systems to identify and remedy any Year 2000 related problems.
At this time, the Corporation has not identified any specific expenses which are
reasonably likely to be incurred by the Corporation in connection with Year 2000
issues and the Corporation does not expect to incur significant expense to
implement corrective measures. No assurance can be given at this time, however,
that significant expense will not be incurred in the future periods. In the
event that the Corporation is ultimately required to purchase replacement
computer systems, programs and equipment, or that substantial expense must be
incurred to make the Corporation's current systems, programs and equipment Year
2000 compliant, the Corporation's net income and financial condition could be
adversely affected. While the Corporation is endeavoring to ensure that its
computer-dependent operations are Year 2000 compliant, no assurance can be given
that some Year 2000 problems will not occur.
In addition to possible expense related to its own systems, the Corporation
could incur losses if Year 2000 issues adversely affect the Corporation's
depositors or borrowers. Such problems could include delayed loan payments due
to Year 2000 problems affecting any of the Corporation's significant borrowers
or impairing the payroll systems of large employers in the Corporation's primary
market area. Because the Corporation's loan portfolio is highly diversified with
regard to individual borrowers and types of businesses, and the Corporation's
primary market area is not significantly dependent upon one employer or
industry, the Corporation does not expect any significant or prolonged Year 2000
related difficulties that will affect net earnings or cash flow.
- --------------------------------------------------------------------------------
23.
<PAGE> 24
THE HOME LOAN SAVINGS BANK
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults On Senior Securities
-----------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
On March 24, 1998, at a special meeting, the members of the Bank
approved the Plan of Conversion pursuant to which the Bank converted
from a state chartered mutual savings and loan association to a state
chartered stock savings and loan association (the "Conversion"). On
March 25, 1998, the Corporation issued 2,248,250 common shares to
persons who subscribed for shares in connection with the Conversion
and the Corporation acquired all of the shares issued by the Bank in
the Conversion in consideration and exchange for 50% of the net
proceeds from the sale of the 2,248,250 common shares of the
Corporation.
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 March 31, 1998.
- --------------------------------------------------------------------------------
24.
<PAGE> 25
THE HOME LOAN SAVINGS BANK
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.
Date: May 11, 1998 /s/ Robert C. Hamilton
---------------------------- ---------------------------
Robert C. Hamilton
President
Date: May 11, 1998 /s/ Preston W. Bair
---------------------------- ---------------------------
Preston W. Bair
Treasurer
- --------------------------------------------------------------------------------
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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 2,643
<INT-BEARING-DEPOSITS> 2,713
<FED-FUNDS-SOLD> 13,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,650
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 54,967
<ALLOWANCE> 198
<TOTAL-ASSETS> 79,773
<DEPOSITS> 47,997
<SHORT-TERM> 0
<LIABILITIES-OTHER> 703
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 31,074
<TOTAL-LIABILITIES-AND-EQUITY> 79,773
<INTEREST-LOAN> 3,499
<INTEREST-INVEST> 228
<INTEREST-OTHER> 74
<INTEREST-TOTAL> 3,802
<INTEREST-DEPOSIT> 1,584
<INTEREST-EXPENSE> 1,601
<INTEREST-INCOME-NET> 2,201
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,308
<INCOME-PRETAX> 932
<INCOME-PRE-EXTRAORDINARY> 604
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 604
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
<YIELD-ACTUAL> 4.89
<LOANS-NON> 0
<LOANS-PAST> 348
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 119
<CHARGE-OFFS> 12
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 198
<ALLOWANCE-DOMESTIC> 198
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
