<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 March 31, 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)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 8, 2000, 1,921,093 shares
of the issuer's no par common stock were issued and outstanding
Transitional Small Business Disclosure Format (check one):
Yes No X
------- -------
<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.................................................................. 23
Item 2. Changes in Securities and Use of Proceeds.......................................... 23
Item 3. Defaults Upon Senior Securities.................................................... 23
Item 4. Submission of Matters to a Vote of Security Holders................................ 23
Item 5. Other Information.................................................................. 23
Item 6. Exhibits and Reports on Form 8-K................................................... 23
SIGNATURES ........................................................................................... 24
</TABLE>
2.
<PAGE> 3
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,460,309 $ 1,824,130
Interest-bearing deposits in other banks 129,159 39,818
Overnight deposits -- 3,500,000
Federal funds sold -- 3,200,000
----------------- -----------------
Total cash and cash equivalents 2,589,468 8,563,948
Interest-bearing time deposits -- 35,152
Securities available for sale 3,408,675 2,969,723
Mortgage-backed securities available for sale 18,737,921 20,248,220
Federal Home Loan Bank stock 1,536,000 1,430,500
Loans, net 82,610,023 73,068,853
Premises and equipment, net 1,136,842 742,062
Accrued interest receivable 573,251 468,664
Other assets 665,362 328,051
----------------- -----------------
Total assets $ 111,257,542 $ 107,855,173
================= =================
LIABILITIES
Deposits $ 61,436,386 $ 56,494,543
Federal Home Loan Bank advances 29,900,000 28,200,000
Other borrowings -- 2,350,000
Accrued interest payable 403,492 526,693
Accrued expenses and other liabilities 171,521 384,941
----------------- -----------------
Total liabilities 91,911,399 87,956,177
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 14,120,071 14,060,770
Retained earnings - substantially restricted 12,530,889 12,154,493
Unearned employee stock ownership plan shares (1,983,802) (2,109,864)
Unearned recognition and retention plan shares (882,069) (1,024,269)
Treasury stock, at cost - 320,657 shares at March 31, 2000
and 219,205 shares at June 30, 1999 (3,771,237) (2,852,948)
Accumulated other comprehensive income (667,709) (329,186)
----------------- -----------------
Total shareholders' equity 19,346,143 19,898,996
----------------- -----------------
Total liabilities and shareholders' equity $ 111,257,542 $ 107,855,173
================= =================
</TABLE>
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 Nine Months Ended
March 31, March 31,
--------- ---------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME
Loans, including fees $ 1,668,965 $ 1,376,896 $ 4,845,075 $ 4,067,421
Securities 358,815 219,878 1,124,529 607,067
Federal Home Loan Bank stock 22,299 10,156 86,140 24,397
Interest-bearing deposits and federal
funds sold 818 88,080 22,730 277,560
------------ ------------ ------------ ------------
Total interest income 2,050,897 1,695,010 6,078,474 4,976,445
INTEREST EXPENSE
Deposits 607,915 536,618 1,777,290 1,596,619
Federal Home Loan Bank advances 410,835 106,796 1,089,412 166,828
Other borrowings 19,288 -- 122,326 --
------------ ------------ ------------ ------------
Total interest expense 1,038,038 643,414 2,989,028 1,763,447
------------ ------------ ------------ ------------
NET INTEREST INCOME 1,012,859 1,051,596 3,089,446 3,212,998
Provision for loan losses 30,000 30,000 90,000 90,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 982,859 1,021,596 2,999,446 3,122,998
NONINTEREST INCOME
Service charges and other fees 44,155 32,136 127,623 103,823
Other income 17,830 11,111 64,517 38,033
------------ ------------ ------------ ------------
Total noninterest income 61,985 43,247 192,140 141,856
NONINTEREST EXPENSE
Salaries and employee benefits 406,468 351,007 1,160,302 942,264
Occupancy and equipment 61,133 43,954 156,516 115,506
State franchise taxes 30,050 39,950 165,050 116,150
Computer processing 31,479 32,812 87,531 98,263
Legal, audit and supervisory exam fees 43,690 26,570 118,419 71,570
Director fees 20,300 20,800 61,900 63,225
Other expense 86,145 67,246 264,454 207,719
------------ ------------ ------------ ------------
Total noninterest expense 679,265 582,339 2,014,172 1,614,697
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 365,579 482,504 1,177,414 1,650,157
Income tax expense 119,700 181,300 426,500 600,700
------------ ------------ ------------ ------------
NET INCOME 245,879 301,204 750,914 1,049,457
Other comprehensive income, net of tax (18,516) 11,305 (338,523) 38,674
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME $ 227,363 $ 312,509 $ 412,391 $ 1,088,131
============ ============ ============ ============
BASIC EARNINGS PER COMMON SHARE $ .15 $ .15 $ .44 $ .52
============ =========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE $ .15 $ .15 $ .44 $ .51
============ ============ ============ ============
</TABLE>
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 Nine Months
Ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Additional Unearned Unearned
Paid-In Retained ESOP RRP Treasury
Capital Earnings Shares Shares Shares
------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 1998 $ 21,948,437 $ 11,285,160 $ (1,678,690) $ -- $ --
Net income for the period -- 1,049,457 -- -- --
Cash dividend - $.16 per share -- (331,044) -- -- --
Commitment to release 8,991
ESOP shares 35,964 -- 89,910 -- --
Purchase of 89,930 shares for
recognition and retention plan -- -- -- (1,157,069) --
Compensation expense with respect to
recognition and retention plan -- -- -- 85,400 --
Purchase of 42,070 treasury shares -- -- -- -- (581,383)
Change in fair value of securities
available for sale -- -- -- -- --
-------------- -------------- -------------- -------------- ---------------
Balance at March 31, 1999 $ 21,984,401 $ 12,003,573 $ (1,588,780) $ (1,071,669) $ (581,383)
============== ============== ============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Income Total
------ -----
<S> <C> <C>
Balance at July 1, 1998 $ 9,727 $ 31,564,634
Net income for the period -- 1,049,457
Cash dividend - $.16 per share -- (331,044)
Commitment to release 8,991
ESOP shares -- 125,874
Purchase of 89,930 shares for
recognition and retention plan -- (1,157,069)
Compensation expense with respect to
recognition and retention plan -- 85,400
Purchase of 42,070 treasury shares -- (581,383)
Change in fair value of securities
available for sale 38,674 38,674
-------------- ---------------
Balance at March 31, 1999 $ 48,401 $ 30,794,543
============== ===============
</TABLE>
(Continued)
5.
<PAGE> 6
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
Nine Months Ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Additional Unearned Unearned
Paid-In Retained ESOP RRP Treasury
Capital Earnings Shares Shares Shares
------- -------- ------ ------ ------
<S> <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)
Net income for the period -- 750,914 -- -- --
Cash dividend - $.21 per share -- (374,518) -- -- --
Contribution of accumulated
dividends on unawarded
recognition and retention
plan shares 71,413 -- -- -- --
Commitment to release 11,926
ESOP shares (12,112) -- 126,062 -- --
Compensation expense with respect
to recognition and retention plan -- -- -- 142,200 --
Purchase of 101,452 treasury shares -- -- -- -- (918,289)
Change in fair value of securities
available for sale -- -- -- -- --
--------------- -------------- ---------------- -------------- --------------
Balance at March 31, 2000 $ 14,120,071 $ 12,530,889 $ (1,983,802) $ (882,069) $ (3,771,237)
=============== ============== ================ ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Income Total
------ -----
<S> <C> <C>
Balance at July 1, 1999 $ (329,186) $ 19,898,996
Net income for the period -- 750,914
Cash dividend - $.21 per share -- (374,518)
Contribution of accumulated
dividends on unawarded
recognition and retention
plan shares -- 71,413
Commitment to release 11,926
ESOP shares -- 113,950
Compensation expense with respect
to recognition and retention plan -- 142,200
Purchase of 101,452 treasury shares -- (918,289)
Change in fair value of securities
available for sale (338,523) (338,523)
-------------- --------------
Balance at March 31, 2000 $ (667,709) $ 19,346,143
============== ==============
</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>
Nine Months Ended
March 31,
---------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 750,914 $ 1,049,457
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation 74,100 62,826
Net securities amortization (accretion) (1,576) 6,084
Provision for loan losses 90,000 90,000
FHLB stock dividends (77,800) (24,200)
Compensation expense for ESOP shares 113,950 125,874
Compensation expense for RRP shares 142,200 85,400
Net change in accrued interest receivable and other assets (267,507) (294,089)
Net change in accrued expenses and other liabilities (336,621) (214,013)
Net change in deferred loan fees 9,508 23,184
--------------- ---------------
Net cash from operating activities 497,168 910,523
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available for sale:
Purchases (734,946) (748,906)
Proceeds from maturities 250,000 6,750,000
Mortgage-backed securities available for sale:
Purchases -- (21,164,090)
Proceeds from maturities and principal paydowns 1,044,955 192,767
Net change in interest-bearing time deposits 35,152 1,998,560
Net change in loans (9,640,678) (12,543,873)
Purchase of FHLB stock (27,700) (742,900)
Premises and equipment expenditures (468,880) (166,968)
--------------- ---------------
Net cash from investing activities (9,542,097) (26,425,410)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 4,941,843 5,357,364
Net change in short-term FHLB advances (300,000) 3,000,000
Net change in other short-term borrowings (2,350,000) --
Proceeds from long-term FHLB advances 7,000,000 16,000,000
Repayment of long-term FHLB advances (5,000,000) --
Cash dividends paid (374,518) (331,044)
Contribution of accumulated dividends on unawarded RRP shares 71,413 --
Purchases of recognition and retention plan shares -- (1,157,069)
Purchases of treasury shares (918,289) (581,383)
--------------- ---------------
Net cash from financing activities 3,070,449 22,287,868
--------------- ---------------
Net change in cash and cash equivalents (5,974,480) (3,227,019)
Cash and cash equivalents at beginning of period 8,563,948 7,657,148
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,589,468 $ 4,430,129
=============== ===============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 3,112,229 $ 1,788,991
Income taxes 456,800 752,000
</TABLE>
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 financial position of Home Loan Financial Corporation at
March 31, 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 the Home Loan Financial Corporation for the fiscal year ended
June 30, 1999. The accounting policies of the Home Loan Financial Corporation
described in the notes to the consolidated financial statements contained in the
Home Loan Financial Corporation's June 30, 1999, annual report, have been
consistently followed in preparing this Form 10-QSB.
The consolidated financial statements include the accounts of Home Loan
Financial Corporation ("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 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 consequences 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 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. The key criterion for hedge accounting is that
the hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. SFAS No. 133 does not allow hedging of a
security which is classified as held to maturity. Upon adoption of SFAS No. 133,
companies may reclassify any security from held to maturity to available for
sale if they wish to be able to hedge the security in the future. SFAS No. 133,
as amended by SFAS No. 137, is effective for fiscal years beginning after June
15, 2000 with early adoption encouraged for any fiscal quarter beginning July 1,
1998 or later, with no retroactive application. Management does not expect the
adoption of SFAS No. 133 to have a significant impact on the Corporation's
financial statements.
NOTE 2 - SECURITIES
Securities at March 31, 2000 and June 30, 1999 were as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
MARCH 31, 2000
Securities available for sale
U.S. Government agencies $ 3,486,495 $ -- $ (77,820) $ 3,408,675
============== ========== =========== ===============
Mortgage-backed securities
available for sale
U.S. Government agencies $ 19,671,782 $ -- $ (933,861) $ 18,737,921
============== ========== =========== ===============
JUNE 30, 1999
Securities available for sale
U.S. Treasury notes $ 249,703 $ 1,195 $ -- $ 250,898
U.S. Government agencies 2,749,060 -- (30,235) 2,718,825
-------------- ---------- ----------- ---------------
$ 2,998,763 $ 1,195 $ (30,235) $ 2,969,723
============== ========== =========== ===============
Mortgage-backed securities
available for sale
U.S. Government agencies $ 20,717,947 $ 1,617 $ (471,344) $ 20,248,220
============== ========== =========== ===============
</TABLE>
(Continued)
9.
<PAGE> 10
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - SECURITIES (Continued)
Contractual maturities of securities 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 $ 3,486,495 $ 3,408,675
Mortgage-backed securities 19,671,782 18,737,921
-------------- ---------------
$ 23,158,277 $ 22,146,596
============== ===============
</TABLE>
No securities were sold during the three and nine months ended March 31, 2000 or
1999.
NOTE 3 - LOANS
Loans at March 31, 2000 and June 30, 1999 were as follows:
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
---- ----
<S> <C> <C>
Residential real estate loans:
1 - 4 family $ 54,076,509 $ 50,059,806
Home equity 2,649,382 1,812,681
Nonresidential real estate 10,026,664 5,444,843
Real estate construction 2,000,319 2,791,291
Land 626,849 1,148,472
-------------- ---------------
Total real estate loans 69,379,723 61,257,093
Commercial loans 3,232,614 2,876,994
Consumer loans:
Home improvement 4,397,155 4,477,735
Automobile 3,930,399 3,408,549
Deposit 422,127 412,602
Credit card 491,970 435,749
Other 2,189,250 2,157,295
-------------- ---------------
Total consumer loans 11,430,901 10,891,930
-------------- ---------------
Total loans 84,043,238 75,026,017
Less:
Allowance for loan losses (412,213) (322,700)
Loans in process (862,852) (1,485,822)
Net deferred loan fees and costs (158,150) (148,642)
-------------- ---------------
$ 82,610,023 $ 73,068,853
============== ===============
</TABLE>
(Continued)
10.
<PAGE> 11
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - LOANS (Continued)
Activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
--------------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning balance $ 383,085 $ 276,763 $ 322,700 $ 223,237
Provision for loan losses 30,000 30,000 90,000 90,000
Loans charged-off (1,113) (10,722) (1,113) (17,915)
Recoveries 241 1,330 626 2,049
-------------- ------------- ------------- --------------
Ending balance $ 412,213 $ 297,371 $ 412,213 $ 297,371
============== ============= ============= ==============
</TABLE>
As of March 31, 2000 and June 30, 1999 and for the three and nine months ended
March 31, 2000 and 1999, impaired loans were immaterial. No loans were on
nonaccrual status at March 31, 2000 or June 30, 1999.
NOTE 4 - COMMITMENTS, OFF-BALANCE SHEET RISK AND CONTINGENCIES
Various contingent liabilities are not reflected in the consolidated financial
statements, including claims and legal actions arising in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
the ultimate disposition of such legal actions is not expected to have a
material effect on the Corporation's financial condition or results of
operations.
Some financial instruments are used in the normal course of business to meet the
financing needs of customers and to reduce exposure to interest rate changes.
These financial instruments include commitments to extend credit, standby
letters of credit and financial guarantees. These involve, to varying degrees,
credit and interest-rate risk more than the amounts reported in the financial
statements.
Exposure to credit loss if the other party does not perform is represented by
the contractual amount for commitments to extend credit, standby letters of
credit and financial guarantees written. The same credit policies are used for
commitments and conditional obligations as are used for loans. The amount of
collateral obtained, if deemed necessary, on extension of credit is based on
management's credit evaluation and generally consists of residential or
commercial real estate.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the commitment.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being used, the total commitments do not necessarily represent
future cash requirements. Standby letters of credit and financial guarantees are
conditional commitments to guarantee a customer's performance to a third party.
(Continued)
11.
<PAGE> 12
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - COMMITMENTS, OFF-BALANCE SHEET RISK AND CONTINGENCIES (Continued)
A summary of the notional or contractual amounts of financial instruments with
off-balance sheet risk at March 31, 2000 and June 30, 1999 follows:
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
---- ----
<S> <C> <C>
Lines of credit-variable rate $ 2,610,000 $ 2,268,000
1-4 family residential real estate-variable rate 1,485,000 523,000
1-4 family residential real estate-fixed rate 925,000 545,000
Commercial real estate-variable rate -- 735,000
Credit card arrangements-fixed rate 1,248,000 1,119,000
</TABLE>
The interest rates on fixed-rate commitments ranged from 8.50% to 13.90% at
March 31, 2000 and 6.75% to 13.90% at June 30, 1999. The interest rates on
variable rate commitments ranged from 8.00% to 10.50% at March 31, 2000 and
6.625% to 8.25% at June 30, 1999.
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
54,757 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 $37,961 and $113,950 for the three and nine months
ended March 31, 2000 and $40,459 and $125,874 for the three and nine months
ended March 31, 1999. The ESOP shares at March 31, 2000 and June 30, 1999 were
as follows:
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
---- ----
<S> <C> <C>
Allocated shares 35,041 11,157
Shares committed to be released for allocation 11,926 23,884
Unreleased shares 187,650 199,576
------------- --------------
Total ESOP shares 234,617 234,617
============= ==============
Fair value of unreleased shares $ 1,231,547 $ 1,871,025
============= ==============
</TABLE>
(Continued)
12.
<PAGE> 13
HOME LOAN FINANCIAL CORPORATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 were 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 March 31, 2000, 35,914 options are vested. During the nine
months ended March 31, 2000, 1,400 options were forfeited and no options were
exercised leaving 189,270 options outstanding at March 31, 2000. There are
35,555 shares of authorized but unissued common stock reserved for which no
options have been granted at March 31, 2000. Employee compensation expense under
stock option plans is reported only if options are granted below market price at
the grant date.
NOTE 7 - RECOGNITION AND RETENTION PLAN
The RRP was adopted by the Board of Directors and approved by the shareholders
of the Corporation on October 13, 1998 to purchase 89,930 common shares, which
is equal to 4% of the common shares sold in connection with the mutual to stock
conversion.
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
March 31, 2000, 14,573 shares are vested and there are 13,064 shares reserved
for future awards. Compensation expense related to the RRP is based on fair
value of the shares at the date of grant. Compensation expense was $47,400 and
$142,200 for the three and nine months ended March 31, 2000 and $46,800 and
$85,400 for the three and nine months ended March 31, 1999.
NOTE 9 - OTHER COMPREHENSIVE INCOME
Other comprehensive income components and related taxes were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Unrealized holding gains and losses on
available-for-sale securities $ (28,145) $ 17,129 $ (512,914) $ 58,597
Tax effect 9,629 (5,824) 174,391 (19,923)
----------- ----------- ----------- -----------
Other comprehensive income $ (18,516) $ 11,305 $ (338,523) $ 38,674
=========== =========== =========== ===========
</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
The factors used in the earnings per share computation are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------- ---------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic
Net income $ 245,879 $ 301,204 $ 750,914 $ 1,049,457
=========== =========== ========== ============
Weighted average common shares outstanding 1,938,842 2,214,602 1,977,978 2,235,081
Less: Average unallocated ESOP shares (189,637) (160,375) (193,613) (163,373)
Less: Average nonvested RRP shares (70,417) (84,919) (74,115) (46,764)
----------- ----------- ---------- ------------
Average shares 1,678,888 1,969,308 1,710,250 2,024,944
=========== =========== ========= ============
Basic earnings per common share $ .15 $ .15 $ .44 $ .52
=========== =========== ========== ============
Diluted
Net income $ 245,879 $ 301,204 $ 750,914 $ 1,049,457
=========== =========== ========== ============
Weighted average common shares outstanding
for basic earnings per common share 1,678,788 1,969,308 1,710,250 2,024,944
Add: Dilutive effects of average
nonvested RRP shares -- 39 -- 1,195
Add: Dilutive effects of assumed
exercises of stock options -- 15,599 17,366 13,549
----------- ----------- ---------- ------------
Average shares and dilutive potential
common shares 1,678,788 1,984,946 1,727,616 2,039,688
=========== =========== ========== ============
Diluted earnings per common share $ .15 $ .15 $ .44 $ .51
=========== =========== ========== ============
</TABLE>
Unearned RRP shares did not have a dilutive effect on earnings per share for the
three and nine months ended March 31, 2000, as the fair value of the RRP shares
on the date of grant was greater than the average market price for the periods.
Stock options did not have a dilutive effect on earnings per share for the three
months ended March 31, 2000 as the exercise price was greater than the average
market price for the quarter.
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 March 31, 2000 compared to June 30,
1999, and the consolidated results of operations for the three and nine months
ended March 31, 2000 compared with the same periods 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 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 March 31, 2000 were $111.3 million compared to $107.9 million at
June 30, 1999, an increase of $3.4 million, or 3.2%. The increase in total
assets was primarily in loans, which increased $9.5 million, partially offset by
a decrease in cash and cash equivalents of $6.0 million. Loan growth, which was
predominantly funded by the use of cash and cash equivalents and deposit growth,
consisted primarily of nonresidential real estate loans, which increased $4.6
million, and 1-4 family residential real estate loans, which increased $4.0
million. The growth in residential and nonresidential real estate loans was due
to competitive pricing. Changes in other loan and asset categories were not
significant.
Securities and mortgage-backed securities available for sale decreased from
$23.2 million at June 30, 1999 to $22.1 million at March 31, 2000, due to $1.3
million in maturities and principal paydowns and a $500,000 market value decline
in the portfolio partially offset by $700,000 in purchases.
15.
<PAGE> 16
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Total deposits increased $4.9 million, from $56.5 million at June 30, 1999, to
$61.4 million at March 31, 2000. The increase in deposits was primarily in
certificates of deposit, which increased $2.9 million due to the Bank being more
competitive on rates paid compared to the market in order to attract funds for
loan growth. Noninterest-bearing demand accounts increased $1.4 million and NOW
and money market account increased $1.2 million due to the Bank offering
competitively priced account packages. The increases were partially offset by
$500,000 decrease in savings accounts. The certificates of deposit portfolio as
a percent of total deposits increased from 48.8% at June 30, 1999 to 49.7% at
March 31, 2000. Almost all certificates of deposit mature in less than three
years with the majority maturing in the next year.
Federal Home Loan Bank ("FHLB") advances totaled $29.9 million at March 31,
2000, compared to $28.2 million at June 30, 1999, an increase of $1.7 million.
The Corporation increased its long-term advances from the FHLB by $2.0 million
and reduced its cash management short-term borrowings by $300,000. 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 THREE MONTHS ENDED MARCH 31, 2000 AND
MARCH 31, 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 $245,879 for the three months ended March 31, 2000, compared to
$301,204 for the three months ended March 31, 1999. The decrease in net income
for the three months ended March 31, 2000 was the result of an increase in
noninterest expense and a decrease in net interest income.
Net interest income totaled $1,012,859 for the three months ended March 31,
2000, compared to $1,051,596 for the three months ended March 31, 1999,
representing a decrease of $38,737, or 3.7%. The change in net interest income
is attributable to a larger increase in interest-bearing liabilities compared to
interest-earning assets due to a special capital distribution of $4.00 per
share, or $8.5 million, paid to shareholders in May 1999, which was funded with
borrowings.
Interest and fees on loans increased $292,069, or 21.2%, from $1,376,896 for the
three months ended March 31, 1999 to $1,668,965 for the three months ended March
31, 2000. The increase was due to higher average balances of loans.
16.
<PAGE> 17
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Interest earned on securities totaled $358,815 for the three months ended March
31, 2000, compared to $219,878 for the three months ended March 31, 1999. The
increase was a result of a higher average balance of securities partially offset
by a decrease in the yield earned. The higher average balance of securities was
due to the purchase of $20.0 million of mortgage-backed securities in March 1999
as part of the Corporation's capital leveraging strategy.
Interest on interest-bearing deposits and federal funds sold decreased $87,262
from $88,080 for the three months ended March 31, 1999, to $818 for the three
months ended March 31, 2000. The decrease was the result of lower average
balances of interest bearing deposits and federal funds sold primarily due to
using these funds for loan growth.
Dividends on FHLB stock increased for the three months ended March 31, 2000,
compared to the three months ended March 31, 1999, primarily due to a
substantial increase in the number of shares of FHLB stock owned. The increase
in FHLB stock was required to obtain the current level of advances.
Interest paid on deposits increased for the three months ended March 31, 1999,
compared to the three months ended March 31, 2000. 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 aggressively pricing deposit products to
attract funds for loan growth.
Interest on FHLB advances and other borrowings totaled $430,123 for the three
months ended March 31, 2000, compared to $106,796 for the three months ended
March 31, 1999. The increase in interest expense was the result of an increase
in the average balance of borrowed funds. The additional borrowings were used to
provide funding for loan demand, investing in mortgage-backed securities to
better leverage the Corporation's capital position and the Corporation's return
of capital distribution.
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 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, known and inherent risks in the nature and volume of the
portfolio, general prevailing economic conditions, changes in the size and
composition of the loan portfolio and specific borrower considerations,
including the ability of the borrower to repay the loan and the estimated value
of the underlying collateral.
The provision for loan losses totaled $30,000 for the three months ended March
31, 2000 and 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, 70% for commercial real estate and 65% for
land loans, established income information and defined ratios of debt to income.
The allowance for loan losses totaled $412,000, or 0.50% of total loans, net of
loans in process and net deferred loan fees and costs at March 31, 2000,
compared with $323,000, or 0.44%, at June 30, 1999.
17.
<PAGE> 18
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Noninterest income includes service fees and other miscellaneous income. For the
three months ended March 31, 2000, noninterest income totaled $61,985 compared
to $43,247 for the three months ended March 31, 1999. During the 2000 period,
the Corporation experienced an increase in overdraft fees and deposit account
service charges.
Noninterest expense totaled $679,265 for the three months ended March 31, 2000,
compared to $582,339 for the same period in 1999. This increase was due
primarily to increases in salaries and employee benefits; occupancy and
equipment expense; legal, audit and supervisory exam fees; and, other expense.
The increase in salaries and employee benefits was the result of additional
staffing hired for the new branch in West Lafayette, Ohio, which opened in
October 1999, and normal, annual merit increases. The occupancy and equipment
expense increase was due to increased depreciation on furniture, fixtures and
equipment and other costs related to the new branch. Legal, audit and
supervisory exam fees and other expense increases were primarily due to the
growth of the Corporation.
The volatility of income tax expense is primarily attributable to the change in
net income before income taxes. The provision for income taxes totaled $119,700
for a 32.7% effective tax rate for the three months ended March 31, 2000
compared to $181,300, for a 37.6% effective tax rate for the three months ended
March 31, 1999.
COMPARISON OF RESULTS OF OPERATIONS FOR NINE MONTHS ENDED MARCH 31, 2000 AND
MARCH 31, 1999
Net income was $750,914 for the nine months ended March 31, 2000, compared to
$1,049,457 for the nine months ended March 31, 1999. The decrease in net income
for the nine months ended March 31, 2000 was the result of an increase in
noninterest expense and a decrease in net interest income.
Net interest income was $3,089,446 for the nine months ended March 31, 2000,
compared to $3,212,998 for the nine months ended March 31, 1999, representing a
decrease of $123,552, or 3.8%. The change in net interest income is attributable
to a larger increase in interest-bearing liabilities compared to
interest-earning assets due to a special capital distribution of $4.00 per
share, or $8.5 million, paid to shareholders in May 1999, which was funded with
borrowings.
Interest and fees on loans increased $777,654, or 19.1%, from $4,067,421 for the
nine months ended March 31, 1999 to $4,845,075 for the nine months ended March
31, 2000. The increase was due to higher average balances of loans.
Interest earned on securities totaled $1,124,529 for the nine months ended March
31, 2000, compared to $607,067 for the nine months ended March 31, 1999. The
increase was a result of a higher average balance of securities partially offset
by a decrease in the yield earned. The higher average balance of securities was
due to the purchase of $20.0 million of mortgage-backed securities in March 1999
as part of the Corporation's capital leveraging strategy.
Interest on interest-bearing deposits and federal funds sold decreased $254,830
from $277,560 for the nine months ended March 31, 1999, to $22,730 for the nine
months ended March 31, 2000. The decrease was the result of lower average
balances of interest-bearing deposits and federal funds sold primarily due to
using those funds for loan growth.
Dividends on FHLB stock increased for the nine months ended March 31, 2000,
compared to the nine months ended March 31, 1999, primarily due to an increase
in the number of shares of FHLB stock owned. The increase in FHLB stock was
required to obtain the volume of advances.
18.
<PAGE> 19
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Interest paid on deposits increased $180,671 from $1,596,619 for the nine months
ended March 31, 1999, compared to the nine months ended March 31, 2000. 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 aggressively pricing
deposit products to attract funds for loan growth.
Interest on FHLB advances and other borrowings totaled $1,211,738 for the nine
months ended March 31, 2000, compared to $166,828 for the nine months ended
March 31, 1999. The increase in interest expense was the result of an increase
in the average balance of borrowed funds. The additional borrowings were used to
provide funding for loan demand, investing in mortgage-backed securities to
better leverage the Corporation's capital position and the Corporation's return
of capital distribution.
The provision for loan losses totaled $90,000 for the nine months ended March
31, 2000 and 1999.
For the nine months ended March 31, 2000, noninterest income totaled $192,140
compared to $141,856 for the nine months ended March 31, 1999. During the 2000
period, the Corporation experienced increases in overdraft fee and deposit
account service charges.
Noninterest expense totaled $2,014,172 for the nine months ended March 31, 2000,
compared to $1,614,697 for the same period in 1999. This increase was due
primarily to increase in salaries and employee benefits; occupancy and equipment
expense; state franchise taxes; legal, audit and supervisory exam fees; and,
other expense. The increase in salaries and employee benefits was the result of
additional staffing hired for the new branch in West Lafayette, Ohio, which
opened in October 1999, normal, annual merit increases, and the RRP, which began
in October 1998 following its approval by shareholders. The occupancy and
equipment expense increase was due to increased depreciation on furniture,
fixtures and equipment and other costs related to the new branch. The increase
in state franchise taxes was due to higher capital levels from the stock
conversion. Legal, audit and supervisory exam fees and other expense increases
were primarily due to the growth of the Corporation.
The volatility of income tax expense is primarily attributable to the change in
net income before income taxes. The provision for income taxes totaled $426,500
for the nine months ended March 31, 2000 compared to $600,700 for the nine
months ended March 31, 1999. The effective tax rate was 36.2% for the nine
months ended March 31, 2000 and 36.4% for the nine months ended March 31, 1999.
19.
<PAGE> 20
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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, 2000 and
1999.
<TABLE>
<CAPTION>
Nine Months
Ended March 31,
--------------------
2000 1999
---- ----
(Dollars in thousands)
<S> <C> <C>
Net income $ 751 $ 1,049
Adjustments to reconcile net income to net cash from
operating activities (254) (138)
------------ ------------
Net cash from operating activities 497 911
Net cash from investing activities (9,542) (26,425)
Net cash from financing activities 3,070 22,288
------------ ------------
Net change in cash and cash equivalents (5,975) (3,227)
Cash and cash equivalents at beginning of period 8,564 7,657
------------ ------------
Cash and cash equivalents at end of period $ 2,589 $ 4,430
============ ============
</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.
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 March 31, 2000, the
Bank's regulatory liquidity was 9.13%. At such date, the Corporation had
commitments to originate variable rate residential and commercial real estate
mortgage loans totaling $1,485,000 and fixed rate residential real estate
mortgage loans totaling $925,000. 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.
20.
<PAGE> 21
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The Bank is required by regulations to meet certain minimum capital
requirements. Failure to meet minimum capital requirements can initiate certain
mandatory actions that, if undertaken, could have a direct material affect on
the Bank's financial statements. Current capital requirements call for tangible
capital of 1.5% of adjusted total assets, core capital (which, for the Bank,
consists solely of tangible capital) of 4.0% of adjusted total assets, except
for institutions with the highest examination rating and acceptable levels of
risk, 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 March 31, 2000, and June 30, 1999, 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, 2000 and June 30, 1999. Management is not aware of any
matter after the latest regulatory exam that would cause the Bank's capital
category to change.
During the quarter ended March 31, 2000, with the approval of the OTS, the Bank
paid a $10.3 million dividend to HLFC to pay off corporate debt and for general
business purposes. Despite this large distribution, the Bank still exceeded
"well capitalized" capital rations by a substantial margin at March 31, 2000.
At March 31, 2000 and June 30, 1999, 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>
MARCH 31, 2000
Total capital (to risk-
weighted assets) $ 12,128 19.1% $ 5,080 8.0% $ 6,350 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 11,716 18.5 2,540 4.0 3,810 6.0
Tier 1 (core) capital (to
adjusted total assets) 11,716 10.4 4,488 4.0 5,610 5.0
Tangible capital (to
adjusted total assets) 11,716 10.4 1,683 1.5 N/A
JUNE 30, 1999
Total capital (to risk-
weighted assets) $ 21,200 37.5% $ 4,520 8.0% $ 5,649 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 20,878 37.0 2,260 4.0 3,390 6.0
Tier 1 (core) capital (to
adjusted total assets) 20,878 19.3 4,334 4.0 5,418 5.0
Tangible capital (to
adjusted total assets) 20,878 19.3 1,625 1.5 N/A
</TABLE>
21.
<PAGE> 22
HOME LOAN FINANCIAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
In addition to certain federal income tax considerations, OTS regulations impose
limitations on the payment of dividends and other capital distributions by
savings associations. Under OTS regulations applicable to converted savings
associations, the Bank is not permitted to pay a cash dividend on its common
shares if its regulatory capital would, as a result of payment of such
dividends, be reduced below the amount required for the liquidation account
established in connection with the Conversion, or below applicable regulatory
capital requirements prescribed by the OTS.
An application must be submitted and approval from the OTS must be obtained by a
subsidiary of a savings and loan holding company (1) if the proposed
distribution would cause total distributions for that year to exceed net income
for that calendar year to date plus the savings association's retained net
income for the preceding two years; (2) if the savings association will not be
at least adequately capitalized following the capital distribution; (3) if the
proposed distribution would violate a prohibition contained in any applicable
statute, regulation or agreement between the savings association and the OTS (or
the FDIC), or a condition imposed on the savings association in an OTS approved
application or notice; or, (4) if the savings association has not received
certain examination ratings from the OTS. If a savings association subsidiary of
a holding company is not required to file an application, it must file a notice
with the OTS.
In March 2000, the Board of Directors of the Corporation authorized the purchase
of up to 5% of the Corporation's outstanding common shares over a one-year
period. As of March 31, 2000, no shares have been purchased under the 5%
repurchase.
22.
<PAGE> 23
HOME LOAN FINANCIAL CORPORATION
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. 27: Financial Data Schedule
Exhibit No. 11: Statement re: computation of per share earnings
(reference is hereby made to Consolidated Statements of Income
on page 4, hereof.)
(b) No current reports on Form 8-K were filed by the small business
issuer during the quarter ended March 31, 2000.
23.
<PAGE> 24
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: May 10, 2000 /s/ Robert C. Hamilton
- ------------------ --------------------------------------
Robert C. Hamilton
President and Chief Executive Officer
Date: May 10, 2000 /s/ Preston W. Bair
- ------------------ --------------------------------------
Preston W. Bair
Secretary, Treasurer and Chief
Financial Officer
24.
<PAGE> 25
HOME LOAN FINANCIAL CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER
- ------ ----------- -----------
<S> <C> <C>
11 Statement re: computation of per share earnings Reference is hereby made to Consolidated
Statements of Income on page 4 and Note 1
of Notes to Consolidated Financial
Statements on page 8, hereof.
27 Financial Data Schedule 26
</TABLE>
25.
<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-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 2,460
<INT-BEARING-DEPOSITS> 129
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,683
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 82,610
<ALLOWANCE> 412
<TOTAL-ASSETS> 111,258
<DEPOSITS> 61,436
<SHORT-TERM> 5,900
<LIABILITIES-OTHER> 575
<LONG-TERM> 24,000
0
0
<COMMON> 0
<OTHER-SE> 19,346
<TOTAL-LIABILITIES-AND-EQUITY> 111,258
<INTEREST-LOAN> 4,845
<INTEREST-INVEST> 1,211
<INTEREST-OTHER> 23
<INTEREST-TOTAL> 6,078
<INTEREST-DEPOSIT> 1,777
<INTEREST-EXPENSE> 2,989
<INTEREST-INCOME-NET> 3,089
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,014
<INCOME-PRETAX> 1,177
<INCOME-PRE-EXTRAORDINARY> 751
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 751
<EPS-BASIC> .44
<EPS-DILUTED> .44
<YIELD-ACTUAL> 3.97
<LOANS-NON> 0
<LOANS-PAST> 50
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 323
<CHARGE-OFFS> 1
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 412
<ALLOWANCE-DOMESTIC> 306
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 106
</TABLE>
