<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE 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)
As of November 1, 2000 the latest practical date, 1,853,993 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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1.
<PAGE> 2
HOME LOAN FINANCIAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <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................................................... 7
Notes to Consolidated Financial Statements ............................................. 8
Item 2. Management's Discussion and Analysis............................................... 15
Part II - Other Information
Item 1. Legal Proceedings.................................................................. 21
Item 2. Changes in Securities and Use of Proceeds.......................................... 21
Item 3. Defaults Upon Senior Securities.................................................... 21
Item 4. Submission of Matters to a Vote of Security Holders................................ 21
Item 5. Other Information.................................................................. 21
Item 6. Exhibits and Reports on Form 8-K................................................... 21
SIGNATURES ........................................................................................... 22
</TABLE>
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2.
<PAGE> 3
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
---- ----
<S> <C> <C>
ASSETS
Cash and due from financial institutions $ 1,855,663 $ 2,133,172
Interest-bearing deposits in other financial institutions -- 103,093
------------ ------------
Total cash and cash equivalents 1,855,663 2,236,265
Securities available for sale 3,450,150 3,417,675
Mortgage-backed securities available for sale 18,379,462 18,422,861
Federal Home Loan Bank stock 1,593,500 1,564,100
Loans, net 89,528,225 85,852,772
Premises and equipment, net 1,131,327 1,148,897
Accrued interest receivable 599,303 585,128
Other assets 342,985 503,150
------------ ------------
Total assets $116,880,615 $113,730,848
============ ============
LIABILITIES
Deposits $ 65,798,545 $ 64,951,022
Federal Home Loan Bank advances 30,400,000 28,625,000
Accrued interest payable 432,560 447,463
Accrued expenses and other liabilities 377,061 258,755
------------ ------------
Total liabilities 97,008,166 94,282,240
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 -- --
Additional paid-in capital 14,083,151 14,083,151
Retained earnings - substantially restricted 12,811,725 12,665,932
Unearned employee stock ownership plan shares (1,809,740) (1,873,155)
Unearned recognition and retention plan shares (782,765) (832,265)
Treasury stock, at cost - 366,157 shares at September 30, 2000
and 353,657 shares at June 30, 2000 (4,076,112) (3,989,862)
Accumulated other comprehensive income (loss) (353,810) (605,193)
------------ ------------
Total shareholders' equity 19,872,449 19,448,608
------------ ------------
Total liabilities and shareholders' equity $116,880,615 $113,730,848
============ ============
</TABLE>
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See accompanying notes to consolidated financial statements.
3.
<PAGE> 4
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------
2000 1999
---- ----
<S> <C> <C>
Interest income
Loans, including fees $1,922,648 $1,561,743
Securities 360,360 392,325
Dividends on Federal Home Loan Bank stock 29,487 26,141
Interest-bearing deposits and federal funds sold 736 19,841
---------- ----------
Total interest income 2,313,231 2,000,050
Interest expense
Deposits 734,558 578,775
Federal Home Loan Bank advances 424,428 319,517
Other borrowings -- 48,807
---------- ----------
Total interest expense 1,158,986 947,099
---------- ----------
Net interest income 1,154,245 1,052,951
Provision for loan losses 15,000 30,000
---------- ----------
Net interest income after provision for loan losses 1,139,245 1,022,951
Noninterest income
Service charges and other fees 50,681 40,355
Other income 18,214 17,030
---------- ----------
Total noninterest income 68,895 57,385
Noninterest expense
Salaries and employee benefits 408,919 370,543
Occupancy and equipment 55,050 41,683
State franchise taxes 36,000 76,500
Computer processing 32,502 28,285
Legal, audit and supervisory exam fees 41,652 39,245
Director fees 20,800 20,800
Other expense 82,923 81,048
---------- ----------
Total noninterest expense 677,846 658,104
---------- ----------
Income before income taxes 530,294 422,232
Income tax expense 194,300 166,300
---------- ----------
Net income 335,994 255,932
Other comprehensive income (loss), net of tax 251,383 (28,075)
---------- ----------
Comprehensive income $ 587,377 $ 227,857
========== ==========
Basic earnings per common share $ .20 $ .15
========== ==========
Diluted earnings per common share $ .20 $ .14
========== ==========
</TABLE>
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See accompanying notes to consolidated financial statements.
4.
<PAGE> 5
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Three Months Ended September 30, 2000 and 1999
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Additional Unearned Unearned Other
Paid-In Retained ESOP RRP Treasury Comprehensive
Capital Earnings Shares Shares Shares Income (Loss) Total
------- -------- ------ ------ ------ ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1999 $14,060,770 $12,154,493 $(2,109,864) $(1,024,269) $(2,852,948) $(329,186) $19,898,996
Net income for the period -- 255,932 -- -- -- -- 255,932
Cash dividend - $.065 per share -- (131,864) -- -- -- -- (131,864)
Commitment to release 3,975 ESOP
shares (1,567) -- 42,027 -- -- -- 40,460
Compensation expense with respect
to recognition and retention plan -- -- -- 47,400 -- -- 47,400
Purchase of 37,900 treasury shares -- -- -- -- (372,387) -- (372,387)
Change in fair value of securities
available for sale, net of tax
effects -- -- -- -- -- (28,075) (28,075)
----------- ----------- ----------- ----------- ----------- --------- -----------
Balance at September 30, 1999 $14,059,203 $12,278,561 $(2,067,837) $ (976,869) $(3,225,335) $(357,261) $19,710,462
=========== =========== =========== =========== =========== ========= ===========
</TABLE>
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(Continued)
5.
<PAGE> 6
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
Three Months Ended September 30, 2000 and 1999
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Additional Unearned Unearned Other
Paid-In Retained ESOP RRP Treasury Comprehensive
Capital Earnings Shares Shares Shares Income (Loss) Total
------- -------- ------ ------ ------ ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 2000 $14,083,151 $12,665,932 $(1,873,155) $(832,265) $(3,989,862) $(605,193) $19,448,608
Net income for the period -- 335,994 -- -- -- -- 335,994
Cash dividend - $.10 per share -- (171,786) -- -- -- -- (171,786)
Commitment to release 6,000 ESOP
shares -- (18,415) 63,415 -- -- -- 45,000
Compensation expense with respect
to recognition and retention plan -- -- -- 49,500 -- -- 49,500
Purchase of 12,500 treasury shares -- -- -- -- (86,250) -- (86,250)
Change in fair value of securities
available for sale, net of tax
effects -- -- -- -- -- 251,383 251,383
----------- ----------- ----------- --------- ----------- --------- -----------
Balance at September 30, 2000 $14,083,151 $12,811,725 $(1,809,740) $(782,765) $(4,076,112) $(353,810) $19,872,449
=========== =========== =========== ========= =========== ========= ===========
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
6.
<PAGE> 7
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 335,994 $ 255,932
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation 27,000 20,700
Securities amortization and accretion (1,464) 378
Provision for loan losses 15,000 30,000
FHLB stock dividends (29,400) (26,100)
Compensation expense on ESOP shares 45,000 40,460
Compensation expense on RRP shares 49,500 47,400
Net change in accrued interest receivable and other assets 16,491 (116,215)
Net change in accrued expenses and other liabilities 103,403 (16,924)
Net change in deferred loan fees 1,664 4,807
---------- ----------
Net cash from operating activities 563,188 240,438
CASH FLOWS FROM INVESTING ACTIVITIES
Mortgage-backed securities available for sale:
Proceeds from maturities and principal paydowns 393,270 367,690
Net change in interest-bearing time deposits -- (480)
Net change in loans (3,692,117) (3,616,245)
Premises and equipment expenditures (9,430) (233,923)
---------- ----------
Net cash from investing activities (3,308,277) (3,482,958)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 847,523 355,854
Net change in short-term FHLB advances (2,225,000) (3,700,000)
Net change in other short-term borrowings -- 125,000
Proceeds from long-term FHLB advances 4,000,000 --
Cash dividends paid (171,786) (131,864)
Purchase of treasury stock (86,250) (372,387)
---------- ----------
Net cash from financing activities 2,364,487 (3,723,397)
---------- ----------
Net change in cash and cash equivalents (380,602) (6,965,917)
Cash and cash equivalents at beginning of period 2,236,265 8,563,948
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,855,663 $1,598,031
========== ==========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $1,173,889 $ 963,087
Income taxes 140,000 325,000
</TABLE>
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See accompanying notes to consolidated financial statements.
7.
<PAGE> 8
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------
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 consolidated financial position of Home Loan Financial
Corporation ("HLFC") at September 30, 2000, 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 HLFC for the fiscal year
ended June 30, 2000. The accounting policies of HLFC described in the notes to
the consolidated financial statements contained in HLFC's June 30, 2000,
consolidated financial statements, have been consistently followed in preparing
this Form 10-QSB.
The consolidated financial statements include the accounts of HLFC and its
wholly owned subsidiary, The Home Loan Savings Bank ("Bank") together referred
to as the Corporation. All significant intercompany transactions and balances
have been eliminated.
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 the 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 total 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 amounts for the 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.
Basic earnings per common share is net income divided by the weighted average
number of common shares outstanding during the period. Employee Stock Ownership
Plan ("ESOP") shares are considered outstanding for this calculation unless
unearned. Recognition and Retention Plan ("RRP") shares are considered
outstanding as they become vested. Diluted earnings per common share include the
dilutive effect of RRP shares and the additional potential common shares
issuable under stock options.
--------------------------------------------------------------------------------
(Continued)
8.
<PAGE> 9
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------
NOTE 2 - SECURITIES
Securities at September 30, 2000 and June 30, 2000 were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
September 30, 2000
------------------
<S> <C> <C> <C> <C>
Securities available for sale
U.S. Government agencies $ 3,490,084 $ -- $ (39,934) $ 3,450,150
=========== =========== ========= ===========
Mortgage-backed securities
available for sale
U.S. Government agencies $18,875,604 $ -- $(496,142) $18,379,462
=========== =========== ========= ===========
June 30, 2000
-------------
Securities available for sale
U.S. Government agencies $ 3,488,289 $ -- $ (70,614) $ 3,417,675
=========== =========== ========= ===========
Mortgage-backed securities
available for sale
U.S. Government agencies $19,269,205 $ -- $(846,344) $18,422,861
=========== =========== ========= ===========
</TABLE>
Contractual maturities of securities at September 30, 2000, were as follows.
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. Securities not due at a single maturity, primarily mortgage-backed
securities, are shown separately.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
---- -----
<S> <C> <C>
Due after one year through five years $ 3,490,084 $ 3,450,150
Mortgage-backed securities 18,875,604 18,379,462
----------- -----------
$22,365,688 $21,829,612
=========== ===========
</TABLE>
No securities were sold during the three months ended September 30, 2000 or
1999. At September 30, 2000 and June 30, 2000, securities with a carrying value
of $1,319,420 and $960,650 were pledged to secure public funds.
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9.
<PAGE> 10
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------
NOTE 3 - LOANS
Loans at September 30, 2000 and June 30, 2000 were as follows:
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
---- ----
<S> <C> <C>
Residential real estate loans:
1 - 4 family $58,785,754 $56,274,675
Home equity 3,493,942 3,051,384
Nonresidential real estate 9,714,366 9,868,272
Real estate construction 2,486,751 2,678,550
Land 614,493 620,592
----------- -----------
Total real estate loans 75,095,306 72,493,473
Commercial loans 3,247,595 3,368,501
Consumer loans:
Home improvement 4,840,930 4,718,366
Automobile 4,764,537 4,368,442
Deposit 359,983 371,173
Credit card 511,749 488,800
Other 2,781,360 2,475,381
----------- -----------
Total consumer loans 13,258,559 12,422,162
----------- -----------
Total loans 91,601,460 88,284,136
Less:
Allowance for loan losses (411,314) (404,888)
Loans in process (1,498,696) (1,864,915)
Net deferred loan fees and costs (163,225) (161,561)
----------- -----------
$89,528,225 $85,852,772
=========== ===========
</TABLE>
Activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------
2000 1999
---- ----
<S> <C> <C>
Balance at beginning of period $404,888 $322,700
Provision for losses 15,000 30,000
Charge-offs (8,662) --
Recoveries 88 240
-------- --------
Balance at end of period $411,314 $352,940
======== ========
</TABLE>
Nonperforming loans consisted of loans past due over 90 days still accruing
interest totaling approximately $506,000 and $100,000 at September 30, 2000 and
June 30, 2000, respectively. The Corporation had no nonaccrual loans at
September 30, 2000 or June 30, 2000. Nonperforming loans include smaller balance
homogeneous loans, such as residential mortgage and consumer loans, which are
collectively evaluated for impairment.
--------------------------------------------------------------------------------
10.
<PAGE> 11
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------
NOTE 3 - LOANS (Continued)
As of September 30, 2000 and June 30, 2000 and for the three months ended
September 30, 2000 and 1999, no loans were required to be evaluated for
impairment on an individual loan basis within the scope of SFAS No. 114.
NOTE 4 - OFF-BALANCE SHEET ACTIVITIES
Loss contingencies, including claims and legal actions arising in the ordinary
course of business, are recorded as liabilities when the likelihood of loss is
probable and an amount or range of loss can be reasonably estimated. Management
does not believe there now are such matters that will have a material effect on
the financial statements.
Some financial instruments, such as loan commitments, credit lines, letters of
credit and overdraft protection, are issued to meet customer financing needs.
These are agreements to provide credit or to support the credit of others, as
long as conditions established in the contract are met, and usually have
expiration dates. Commitments may expire without being used. Off-balance sheet
risk to credit loss exists up to the face amount of these instruments, although
material losses are not anticipated. The same credit policies are used to make
such commitments as are used for loans, including obtaining collateral at
exercise of the commitment.
A summary of the notional or contractual amounts of financial instruments with
off-balance sheet risk at September 30, 2000 and June 30, 2000 follows:
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
---- ----
<S> <C> <C>
Lines of credit-variable rate $2,878,000 $2,526,000
1-4 family residential real estate-variable rate 108,000 1,437,000
1-4 family residential real estate-fixed rate 286,000 318,000
Commercial real estate-variable rate -- 662,000
Credit card arrangements-fixed rate 1,304,000 1,282,000
</TABLE>
The interest rates on fixed-rate commitments ranged from 8.75% to 13.90% at
September 30, 2000 and 8.50% to 13.90% at June 30, 2000. The interest rates on
variable rate commitments were 8.125% at September 30, 2000 and 8.125% to 9.75%
at June 30, 2000.
--------------------------------------------------------------------------------
(Continued)
11.
<PAGE> 12
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------
NOTE 5 - EMPLOYEE STOCK OWNERSHIP PLAN
The Corporation offers an ESOP for the benefit of substantially all employees of
the Corporation. The ESOP borrowed funds from HLFC in order to acquire 179,860
common shares of HLFC at $10.00 per share. 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. When loan payments are
made, ESOP shares are allocated to participants based on relative compensation.
In May 1999, the Corporation declared and paid a $4.00 per share return of
capital distribution. The ESOP received $674,812 from the return of capital
distribution on 168,703 unallocated shares. The ESOP purchased an additional
54,406 shares with the proceeds from the return of capital distribution. The
additional shares purchased will be held in suspense and allocated to
participants in a manner similar to the original ESOP shares.
ESOP compensation expense was $45,000 and $40,460 for the three months ended
September 30, 2000 and September 30, 1999, respectively. The ESOP shares at
September 30, 2000 and June 30, 2000 were as follows:
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
---- ----
<S> <C> <C>
Allocated shares 57,471 35,077
Shares committed to be released for allocation 6,000 22,394
Unreleased shares 170,795 176,795
---------- ----------
Total ESOP shares 234,266 234,266
========== ==========
Fair value of unreleased shares $1,195,565 $1,149,168
========== ==========
</TABLE>
NOTE 6 - STOCK OPTION AND INCENTIVE PLAN
The Home Loan Financial Corporation 1998 Stock Option and Incentive Plan
("Plan") was approved by shareholders on October 13, 1998. A total of 224,825
common shares are available for granting stock options pursuant to the Plan. In
October 1998, the Board of Directors granted options to purchase 180,170 common
shares at an exercise price of $7.69, after adjustment for the return of capital
distribution, to certain officers and directors of the Corporation. In January
2000, the Board of Directors granted options to purchase 10,500 common shares at
an exercise price of $8.19 to certain officers of the Corporation. One-fifth of
the options awarded become first exercisable on each of the first five
anniversaries of the date of grant. The option period expires 10 years from the
date of grant. At September 30, 2000 and June 30, 2000, 35,714 options were
vested. Through June 30, 2000, a total of 1,600 options had been forfeited.
During the three months ended September 30, 2000, no options were forfeited and
no options were exercised, leaving 189,070 options outstanding at September 30,
2000. There are 35,755 shares of authorized but unissued common stock reserved
for which no options have been granted at September 30, 2000 and June 30, 2000.
Employee compensation expense under stock option plans is reported only if
options are granted below market price at the grant date.
--------------------------------------------------------------------------------
(Continued)
12.
<PAGE> 13
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------
NOTE 7 - RECOGNITION AND RETENTION PLAN
A RRP was adopted by the Board of Directors and approved by the shareholders of
the Corporation on October 13, 1998 to purchase 89,390 common shares of the
Corporation. The RRP will be used to provide directors and key employees with an
ownership interest in the Corporation by compensating such individuals for
services to the Corporation.
In conjunction with the adoption of the RRP on October 13, 1998, the Board of
Directors awarded 72,866 shares to certain directors and officers of the
Corporation. In January 2000, the Board of Directors awarded 4,000 shares to
certain officers of the Corporation. One-fifth of such shares will be earned and
nonforfeitable on each of the first five anniversaries of the date of the
awards. However, in case of the death or disability of a participant, the
participant's shares will be deemed earned and nonforfeitable upon such date. At
September 30, 2000, 14,573 shares were vested and there were 13,064 shares
reserved for future awards. Compensation expense related to RRP shares is based
upon the cost of the shares, which approximates fair value at the date of grant.
Compensation expense was $49,500 and $47,400 for the three months ended
September 30, 2000 and 1999, respectively.
NOTE 8 - EARNINGS PER SHARE
The factors used in the earnings per share computation were as follows.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------
2000 1999
---- ----
<S> <C> <C>
Basic
Net income $ 335,994 $ 255,932
========== ==========
Weighted average common shares outstanding 1,888,261 2,016,395
Less: Average unallocated ESOP shares (173,795) (197,638)
Less: Average nonvested RRP shares (62,746) (77,712)
---------- ----------
Average shares 1,651,720 1,741,045
========== ==========
Basic earnings per common share $ .20 $ .15
========== ==========
Diluted
Net income $ 335,994 $ 255,932
========== ==========
Weighted average common shares outstanding
for basic earnings per common share 1,651,720 1,741,045
Add: Dilutive effects of assumed exercises of stock options -- 32,304
---------- ----------
Average shares and dilutive potential
common shares 1,651,720 1,773,349
========== ==========
Diluted earnings per common share $ .20 $ .14
========== ==========
</TABLE>
--------------------------------------------------------------------------------
(Continued)
13.
<PAGE> 14
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------
NOTE 8 - EARNINGS PER SHARE (Continued)
Unearned RRP shares did not have a dilutive effect on earnings per share for the
three months ended September 30, 2000 or 1999, as the fair value of the RRP
shares on the date of grant was greater than the average market price for the
period. Outstanding stock options, which totaled 189,070 at September 30, 2000,
did not have a dilutive effect on earnings per share for the three months ended
September 30, 2000 as the exercise price was greater than the average market
price for the quarter.
NOTE 9 - OTHER COMPREHENSIVE INCOME
Other comprehensive income (loss) components and related taxes were as follows.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------
2000 1999
---- ----
<S> <C> <C>
Unrealized holding gains and (losses) on
available-for-sale securities $ 380,882 $(42,536)
Tax effect (129,499) 14,461
--------- --------
Other comprehensive income (loss) $ 251,383 $(28,075)
========= ========
</TABLE>
--------------------------------------------------------------------------------
14.
<PAGE> 15
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------
INTRODUCTION
In the following pages, management presents an analysis of the consolidated
financial condition of the Corporation as of September 30, 2000 compared to June
30, 2000, and the consolidated results of operations for the three months ended
September 30, 2000 compared with the same period in 1999. This discussion is
designed to provide a more comprehensive review of the operating results and
financial position than what could be obtained from an examination of the
consolidated financial statements alone. This analysis should be read in
conjunction with the interim consolidated 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 that may be made to any
forward-looking statements to reflect occurrence of anticipated or unanticipated
events or circumstances after the date of such statements.
FINANCIAL CONDITION
Total assets at September 30, 2000 were $116.9 million compared to $113.7
million at June 30, 2000, an increase of $3.2 million, or 2.8%. The increase in
total assets was primarily in loans. Loan growth, which totaled $3.7 million,
consisted primarily of residential real estate loans, which increased $2.5
million. The growth in residential real estate loans was due to competitive
pricing.
Total deposits increased $848,000, from $65.0 million at June 30, 2000, to $65.8
million at September 30, 2000. The increase in deposits was primarily in
certificate of deposits, which increased $2.6 million due to the Bank being more
competitive on rates paid. This increase was partially offset by decreases in
NOW, money market and savings accounts. The certificates of deposit portfolio as
a percent of total deposits increased from 51.5% at June 30, 2000 to 54.8% at
September 30, 2000. Almost all certificates of deposit mature in less than three
years, with the majority maturing in the next year.
--------------------------------------------------------------------------------
(Continued)
15.
<PAGE> 16
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------
Federal Home Loan Bank ("FHLB") advances totaled $30.4 million at September 30,
2000, compared to $28.6 million at June 30, 2000, an increase of $1.8 million.
The Corporation utilized the additional advances to fund loan growth. A portion
of the borrowings under the Bank's $10.0 million cash-management line of credit
with the FHLB were repaid by two advances with terms of one year and two years,
respectively, in the amount of $2.0 million each. At September 30, 2000 and June
30, 2000, $4.4 million and $6.6 million, respectively, was outstanding on this
line. The Corporation had no changes in its long-term advances from the FHLB
other than the addition of the two advances described above. The interest rates
on the long-term borrowings are fixed for a specified number of years, then
convertible to variable rates at the option of the FHLB. Interest is due monthly
and principal is due upon maturity. If the convertible option is exercised, the
advance may be prepaid without penalty.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
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. The demand for real estate loans and other types of
loans influence lending activities, 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 $335,994 for the three months ended September 30, 2000, compared
to $255,932 for the three months ended September 30, 1999. The increase in net
income for the three months ended September 30, 2000 was the result of an
increase in net interest income and an increase in noninterest income partially
offset by an increase in noninterest expense.
Net interest income totaled $1,154,245 for the three months ended September 30,
2000, compared to $1,052,951 for the three months ended September 30, 1999,
representing an increase of $101,294, or 9.6%. The change in net interest income
is attributable to an increase in average interest-earning assets partially
offset by a slight decline in the net interest margin.
Interest and fees on loans increased $360,905, or 23.1%, from $1,561,743 for the
three months ended September 30, 1999 to $1,922,648 for the three months ended
September 30, 2000. The increase was due to a higher average balance of loans
resulting from strong loan demand.
Interest earned on securities totaled $360,360 for the three months ended
September 30, 2000, compared to $392,325 for the three months ended September
30, 1999. The decrease was a result of a lower average balance of securities due
to the principal repayment of mortgage-backed securities.
--------------------------------------------------------------------------------
(Continued)
16.
<PAGE> 17
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------
Interest on interest-bearing deposits and federal funds sold decreased $19,105
from $19,841 for the three months ended September 30, 1999 to $736 for the three
months ended September 30, 2000. The decrease was the result of lower average
balances of interest bearing deposits and federal funds sold.
Interest paid on deposits increased $155,783 for the three months ended
September 30, 2000, compared to the three months ended September 30, 1999. The
increase in interest expense was the result of an increase in the cost of funds
and an increase in the average balance of deposits. The increase in the cost of
funds was primarily due to general market conditions and having a larger
percentage of the portfolio being comprised of certificates of deposit.
Interest on FHLB advances totaled $424,428 for the three months ended September
30, 2000, compared to $319,517 for the three months ended September 30, 1999.
The increase in interest expense was the result of an increase in the average
balance of FHLB advances and an increase in interest rates on advances. The
additional borrowings were used to provide funding for loan growth.
Interest on other borrowings totaled $48,807 for the three months ended
September 30, 1999. No other borrowings were outstanding during the three months
ended September 30, 2000.
The Corporation maintains an allowance for loan losses in an amount that, in
management's judgment, is adequate to absorb probable losses 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 probable losses 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 $15,000 for the three months ended
September 30, 2000, compared to $30,000 for the same period in 1999. The
Corporation has not experienced significant net charge-offs in any of the
periods presented. The Corporation's low 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
$411,314, or .46% of total loans, net of loans in process and net deferred loan
fees and costs, at September 30, 2000, compared with $404,888, or .47%, at June
30, 2000.
Noninterest income includes service fees and other miscellaneous income. For the
three months ended September 30, 2000, noninterest income totaled $68,895
compared to $57,385 for the three months ended September 30, 1999.
--------------------------------------------------------------------------------
(Continued)
17.
<PAGE> 18
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------
Noninterest expense totaled $677,846 for the three months ended September 30,
2000, compared to $658,104 for the same period in 1999. This increase was due
primarily to increases in salaries and employee benefits and occupancy and
equipment expense partially offset by a decrease in state franchise taxes. The
increase in salaries and employee benefits was the result of normal, annual
merit increases and additional staffing hired for the new branch in West
Lafayette, Ohio, which opened in October 1999. The occupancy and equipment
expense increase was due to increased depreciation on furniture, fixtures and
equipment also related to the new branch which opened in October 1999. The
decrease in state franchise taxes was the result of lower Bank capital levels on
which the tax is based.
The volatility of income tax expense is primarily attributable to the change in
income before income taxes and the impact the Corporation's stock price has on
the stock-based employee benefit plans. The effective tax rate was 36.6% for the
three months ended September 30, 2000, compared to 39.4% for the three months
ended September 30, 1999.
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, 2000
and 1999.
<TABLE>
<CAPTION>
Three Months
Ended September 30,
2000 1999
---- ----
(Dollars in thousands)
<S> <C> <C>
Net income $ 336 $ 256
Adjustments to reconcile net income to net cash from
operating activities 227 (16)
------- -------
Net cash from operating activities 563 240
Net cash from investing activities (3,308) (3,483)
Net cash from financing activities 2,365 (3,723)
------- -------
Net change in cash and cash equivalents (380) (6,966)
Cash and cash equivalents at beginning of period 2,236 8,564
------- -------
Cash and cash equivalents at end of period $ 1,856 $ 1,598
======= =======
</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 and other sources.
While scheduled loan repayments and maturing securities are relatively
predictable, interest rates, general economic conditions, and competition
influence early loan prepayments, mortgage-backed security prepayments and
deposit flows. 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.
--------------------------------------------------------------------------------
(Continued)
18.
<PAGE> 19
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------
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, 2000,
the Bank's regulatory liquidity was 31.77%. At such date, the Corporation had
commitments to originate variable rate residential and commercial real estate
mortgage loans totaling $108,000 and fixed rate residential real estate mortgage
loans totaling $286,000. 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 4 of the Notes to Consolidated
Financial Statements.
The Bank is required by regulations to meet certain minimum capital
requirements. 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% to 4.0% of adjusted total assets (depending on the
Bank's examination rating) 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). At September 30, 2000, and June 30, 2000, 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, 2000 and June 30, 2000.
Management is not aware of any matter subsequent to the last regulatory
notification that would cause the Bank's capital category to change.
At September 30, 2000 and June 30, 2000, the Bank's actual capital levels and
minimum required levels were as follows:
<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, 2000
------------------
Total capital (to risk-
weighted assets) $12,982 19.3% $5,376 8.0% $6,720 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 12,571 18.7 2,688 4.0 4,032 6.0
Tier 1 (core) capital (to
adjusted total assets) 12,571 10.7 4,696 4.0 5,870 5.0
Tangible capital (to
adjusted total assets) 12,571 10.7 1,761 1.5 N/A
</TABLE>
--------------------------------------------------------------------------------
(Continued)
19.
<PAGE> 20
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------
<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>
June 30, 2000
-------------
Total capital (to risk-
weighted assets) $12,530 19.0% $5,284 8.0% $6,605 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 12,125 18.4 2,642 4.0 3,963 6.0
Tier 1 (core) capital (to
adjusted total assets) 12,125 10.6 4,584 4.0 5,731 5.0
Tangible capital (to
adjusted total assets) 12,125 10.6 1,719 1.5 N/A
</TABLE>
IMPACT OF NEW ACCOUNTING STANDARDS
Beginning July 1, 2000, the Corporation adopted Statement of Financial
Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging
Activities (SFAS 133), subsequently amended by SFAS No. 137 and 138, which
requires all derivatives to be recorded at fair value. Unless the derivatives
are designated as hedges, changes in these fair values will be recorded in the
income statement. Fair value changes involving hedges will generally be recorded
by offsetting gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not otherwise recorded. The adoption of this
new accounting standard did not have a material effect on the financial
statements of the Corporation.
--------------------------------------------------------------------------------
20.
<PAGE> 21
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 10, 2000, 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 2001:
FOR WITHHELD
Neal J. Caldwell 1,545,956 22,800
Charles H. Durmis 1,545,731 23,025
Robert C. Hamilton 1,532,456 36,300
Robert D. Mauch 1,546,056 22,700
Douglas L. Randles 1,545,906 22,850
These other matters were submitted to the Shareholders, for which the
following votes were cast:
1. The ratification of the selection of Crowe, Chizek and Company
LLP as the auditors of Home Loan Financial Corporation for the
current fiscal year.
FOR AGAINST ABSTAIN
--- ------- -------
1,564,455 3,151 1,150
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, 2000.
--------------------------------------------------------------------------------
21.
<PAGE> 22
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.
Date: November 10, 2000 /s/ Robert C. Hamilton
--------------------------- -------------------------------------
Robert C. Hamilton
President and Chief Executive Officer
Date: November 10, 2000 /s/ Preston W. Bair
--------------------------- -------------------------------------
Preston W. Bair
Secretary, Treasurer and Chief
Financial Officer
--------------------------------------------------------------------------------
22.
<PAGE> 23
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER
------ ----------- -----------
27 Financial Data Schedule 24
--------------------------------------------------------------------------------
23.
