<PAGE>
UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
-----------------
or
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from______________________ to ______________________
Commission File Number: 0-27700
HBancorporation, Inc.
- -------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- -------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
37-1351506
- -------------------------------------------------------------
(I.R.S. Employer identification No.)
619 12th Street, Lawrenceville, Illinois 62439
- -------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(618) 943-2515
- -------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- -------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing for the past 90
days. {X}Yes { }No
As of April 25, 1997, there were 493,320 shares of the Registrant's common stock
issued and outstanding.
Transitional Small Business Disclosure Format (Check One):
{ } Yes {X} No
<PAGE>
HBANCORPORATION, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
Part I. Financial Information ----
---------------------
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition at March 31, 1997 1
and June 30, 1996
Consolidated Statements of Income for the three months and nine months 2
ended March 31, 1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity for the 3
nine months ended March 31, 1997 and 1996
Consolidated Statements of Cash Flows for the three and nine months 4
ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Financial Condition 7-11
and Results of Operations
Part II. Other Information
-----------------
Item 1. Legal Proceedings 12
Item 2. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(Unaudited)
March 31, June 30,
1997 1996
--------------- ---------------
ASSETS
<S> <C> <C>
Cash and equivalents:
Cash $ 128,653 $ 103,306
Interest bearing deposits 1,669,443 3,749,850
--------------- ---------------
Total cash and cash equivalents 1,798,096 3,853,156
Certificates of deposit with other banks 163,011 601,459
Investments available for sale at fair value 1,063,992 2,132,044
Investments held to maturity at cost 1,027,031 31,684
Loans receivable, net 12,772,539 10,247,277
Federal Home Loan Bank stock at cost 66,000 66,000
Federal Reserve Bank stock at cost 67,800 67,800
Accrued interest receivable 148,309 139,787
Office property and equipment, net 42,122 42,944
Other assets 47,318 56,522
--------------- ---------------
Total Assets $ 17,196,218 $ 17,238,673
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Passbook savings $ 2,098,394 $ 1,426,133
Money market deposit accounts 174,753 1,180,808
Certificates of deposit 5,894,277 6,076,221
Certificates of deposit $100,000 and over 532,420 229,199
--------------- ---------------
Total Deposits 8,699,844 8,912,361
Other Liabilities: 253,080 168,296
--------------- ---------------
Total Liabilities 8,952,924 9,080,657
--------------- ---------------
Stockholders' Equity:
Common stock, $.01 par value, 2 million shares authorized,
493,320 issued and outstanding 4,933 4,933
Additional paid in capital 4,505,471 4,505,471
Retained earnings 4,006,575 3,954,530
Net unrealized appreciation on available-for-sale securities
net of tax of $57,500 at March 31, 1997 and
$43,000 at June 30, 1996 81,500 68,000
Unearned ESOP compensation (355,185) (374,918)
--------------- ----------------
Total Stockholders' Equity 8,243,294 8,158,016
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 17,196,218 $ 17,238,673
=============== ===============
</TABLE>
See notes to consolidated financial statements.
-1-
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
----------------------------- ----------------------------
(Unaudited) (Unaudited)
1997 1996 1997 1996
------------- -------------- ------------- -------------
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans receivable $ 287,036 $ 216,418 $ 814,854 $ 630,680
Investments 68,755 54,159 264,119 162,517
------------- -------------- ------------- -------------
Total Interest Income 355,791 270,577 1,078,973 793,197
------------- -------------- ------------- -------------
INTEREST EXPENSE
Interest on deposits 111,171 116,676 338,529 355,808
------------- -------------- ------------- -------------
Total Interest Expense 111,171 116,676 338,529 355,808
------------- -------------- ------------- -------------
Net Interest Income 244,620 153,901 740,444 437,389
Provision for Loan Losses -0- -0- 5,000 5,000
------------- -------------- ------------- -------------
Net interest income after provision
for loan losses 244,620 153,901 735,444 432,389
------------- -------------- ------------- -------------
NONINTEREST INCOME
Gain (loss) on sale of assets -0- -0- -0- 1,299
Customer service fees and other 2,868 743 5,234 3,012
------------- -------------- ------------- -------------
Total Noninterest Income 2,868 743 5,234 4,311
------------- -------------- ------------- -------------
NONINTEREST EXPENSES
General and administrative
Compensation and benefits 71,517 45,533 209,227 138,847
Occupancy and equipment 9,714 4,624 26,902 27,848
Deposit insurance premium (1,347) 6,580 17,348 19,539
SAIF assessment fee -0- -0- 62,144 -0-
Computer expense 5,337 2,855 16,382 9,365
Legal expense 6,000 -0- 40,785 4,721
Other 32,771 16,565 82,673 99,476
------------- -------------- ------------- -------------
Total Noninterest Expenses 123,992 76,157 455,461 299,796
------------- -------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME TAX 123,496 78,487 285,217 136,904
Income Tax Expense 47,950 30,705 114,777 173,297
------------- -------------- ------------- -------------
NET INCOME (LOSS) $ 75,546 $ 47,782 $ 170,440 $ (36,393)
============= ============== ============= ==============
Net income per share based on weighted
average shares outstanding of 455,836,
for 1997 $ 0.17 N/A $ 0.37 N/A
============= ============== ============= =============
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Unrealized Unearned
Common Paid in Retained Gain (Loss) Compen- Total
Stock Capital Earnings Securities sation Equity
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1995 $ 0 $ 0 $ 3,783,280 $ 51,157 $ 0 $ 3,834,437
Net (loss) for the nine months
ended March 31, 1996 0 0 (36,393) 0 0 (36,393)
Proceeds from issuance of
common stock 4,933 4,517,272 0 0 (394,650) 4,127,555
Change in net unrealized gain on
securities available-for-sale,
net of applicable deferred income
taxes of $45,113 0 0 0 11,141 0 11,141
Effect of contribution to fund ESOP 0 0 0 0 833 833
------------- ------------- ------------- ------------- ------------- -------------
BALANCE, March 31, 1996 $ 4,933 $ 4,517,272 $ 3,746,887 $ 62,298 $ (393,817) $ 7,937,573
============= ============= ============= ============= ============== =============
BALANCE, June 30, 1996 $ 4,933 $ 4,505,471 $ 3,954,530 $ 68,000 $ (374,918) $ 8,158,016
Net income for the nine months
ended March 31, 1997 0 0 170,440 0 0 170,440
Dividends declared 0 0 (118,395) 0 0 (118,395)
Change in unrealized gain on
securities available-for-sale,
net of applicable deferred income
taxes of $62,000 0 0 0 13,500 0 13,500
Effect of contribution to fund ESOP 0 0 0 0 19,733 19,733
------------- ------------- ------------- ------------- ------------- -------------
BALANCE, March 31, 1997 $ 4,933 $ 4,505,471 $ 4,006,575 $ 81,500 $ (355,185) $ 8,243,294
============= ============= ============= ============= ============== =============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
----------------------------- ----------------------------
(Unaudited) (Unaudited)
1997 1996 1997 1996
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ 75,546 $ 47,782 $ 170,440 $ (36,393)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,887 1,116 8,055 5,943
Decrease (increase) in other assets 844 50,195 9,204 (14,143)
(Increase) decrease in interest receivable (1,140) (24,626) (8,522) (2,649)
Increase in other liabilities 52,841 409,267 186,069 223,703
Provision for loan loss -0- -0- 5,000 5,000
(Gain)loss on sale of assets -0- -0- -0- (1,299)
------------- -------------- ------------- -------------
Cash provided (used) by operating activities 130,978 483,734 370,246 180,162
------------- -------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in certificates of deposit in other
financial institutions, net (increase)
decrease -0- (345,000) 438,448 (541,763)
Proceeds from maturities of investments
held to maturity 564 5,622 4,653 14,983
Proceeds from sales of investments
available-for-sale -0- 9,100 -0- 1,085,405
Purchase of investments available-for-sale -0- (57,786) -0- (57,786)
Purchase of fixed assets (900) -0- (7,233) (10,445)
Net (increase) in loans 90,585 (568,794) (2,530,262) (630,843)
------------- -------------- ------------- -------------
Cash provided (used) by investing activities 90,249 (956,858) (2,094,394) (140,449)
------------- -------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends (39,465) -0- (118,395) -0-
Net increase (decrease) in demand deposits,
NOW accounts, savings accounts and
certificates of deposit (74,515) 3,209,048 (212,517) 3,959,078
------------- -------------- ------------- -------------
Cash provided (used) by financing activities (113,980) 3,209,048 (330,912) 3,959,078
------------- -------------- ------------- -------------
Net increase (decrease) in cash and
cash equivalents 107,247 2,735,924 (2,055,060) 3,998,791
Cash and Cash Equivalents at Beginning
of Period 1,690,849 3,300,099 3,853,156 2,037,232
------------- -------------- ------------- -------------
Cash and Cash Equivalents at End of Period $ 1,798,096 $ 6,036,023 $ 1,798,096 $ 6,036,023
============= ============== ============= =============
Cash paid for:
Interest $ 112,893 $ 123,096 $ 337,277 $ 352,219
============= ============== ============= =============
Income taxes $ 45,000 $ 1,840 $ 37,418 $ 28,033
============= ============== ============= =============
Non-Cash Investing and Financing Activities:
Deposits transferred to stock and paid-in
capital in connection with stock conversion
net of expenses totaling $410,995 $ -0- $ 4,128,388 $ -0- $ 4,128,388
============= ============== ============= =============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
NOTE 1 - BASIS OF PRESENTATION
The unaudited information for the quarter ended March 31, 1997 and 1996,
includes the results of operations of HBancorporation, Inc.(the "Company") and
its wholly owned subsidiary Heritage National Bank (the "Bank"). In the opinion
of management of the Company and the Bank, the financial statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial statements. These interim financial
statements should be read in conjunction with the Company's most recent annual
financial statements and footnotes included in the annual report of Heritage
Financial Corporation for the fiscal year ended June 30, 1996. The Company
changed its name from Heritage Financial Corporation to HBancorporation, Inc. on
October 29, 1996. The results of the period presented are not necessarily
representative of the results of operations and cash flows which may be expected
for the entire year.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
the Bank. All significant inter-company balances and transactions have been
eliminated in consolidation.
NOTE 3 - STOCK CONVERSION
The Company issued 493,320 shares, $.01 par value common stock, for proceeds of
$4,510,404 net of expenses of approximately $423,000. The Bank converted from a
mutual savings association to a stock savings association and then to a national
bank immediately following the formation of the Company and received proceeds of
$2,255,202 in exchange for all its common stock. This transaction was accounted
for using the pooling of interests method. On April 1, 1996, the Company began
trading as a public company on the "pink sheets" published by the National
Quotation Bureau, Inc.
Federal regulations require that, upon conversion from a mutual to stock form of
ownership, a "liquidation account" be established by restricting a portion of
net worth for the benefit of eligible savings account holders who maintain their
savings accounts with the Bank after conversion. In the event of complete
liquidation (and only in such event) each savings account holder who continues
to maintain his savings account shall be entitled to receive a distribution from
the liquidation account after payment of all creditors, but before any
liquidation distribution with respect to capital stock. This account will be
proportionately reduced for any subsequent reduction in such holders' savings
account. Federal regulations impose limitations on the payment of dividends and
other capital distributions, including, among others, that the Company may not
declare or pay a cash dividend on any of its capital stock if the effect thereof
would cause the Bank's capital to be reduced below the amount required for the
liquidation account or the capital requirements imposed by the Financial
Institutions Reform, Recovery, and Enforcement Act.
-5-
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
NOTE 3 - STOCK CONVERSION,CONTINUED
Concurrent with the conversion, the board of directors approved the adoption of
the Company's Employee Stock Ownership Plan (the "ESOP"). The ESOP qualifies
under Sections 401(a) and 501(a) of the Internal Revenue Code, eligibility is
based on hours of service, date of hire, and age. Contributions to the ESOP are
determined by the board of directors, in the form of cash or the Company's
common stock. No employee contributions are accepted. Contributions are
allocated based on the ratio of the participant's compensation to total
compensation of all participants. Participant's account balances are fully
vested after five years of service.
NOTE 4 - NET INCOME PER SHARE
Net income per share of common stock for the nine months ended March 31, 1997
has been computed on the basis of the weighted-average number of shares of
common stock outstanding.
-6-
<PAGE>
HBANCORPORATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
General
The Company was formed at the direction of Lawrenceville Federal Savings and
Loan Association, the predecessor financial institution to the Bank, for the
purpose of owning all the stock outstanding in the Bank. The Company is
incorporated under the laws of Delaware and is generally authorized to engage in
any activity that is permitted for a bank holding company under federal banking
law. The Company acquired all the stock of the Bank in accordance with the
approved plan of conversion. The Company had not engaged in any material
operations at March 31, 1997, and had no significant assets other than its
equity investment in the Bank's stock, cash, investments, and a loan to the
Company's ESOP.
Established in 1935, the Bank (formerly named Lawrenceville Federal Savings and
Loan Association) is a community-oriented financial institution offering a
variety of financial services to meet the needs of the communities it serves.
The Bank's primary market area covers Lawrence County, Illinois, and Knox
County, Indiana. The Bank attracts deposits from the general public and uses
such deposits, together with borrowings and other funds, to originate one to
four family residential mortgages, commercial business loans, consumer loans,
and finance leases. The Bank also invests in U.S. government and agency
obligations and may invest in other permissible investments.
The Bank's results of operations are primarily dependent upon its net interest
income, which is the difference between interest earned on loans and investments
and interest paid on deposits and other borrowed funds. Net interest income is
directly affected by the relative amounts of interest earning assets and
interest bearing liabilities and the interest rates earned or paid on such
amounts. The Bank's results of operations are also affected by the provision for
loan losses and the level of noninterest income and expenses. Noninterest income
consists primarily of service charges. Noninterest expense includes salaries and
employee benefits, occupancy expenses, federal deposit insurance premiums, data
processing expenses, and other operating expenses.
The operating results of the Bank are also affected by general economic
conditions, the monetary and fiscal policies of federal agencies, and the
policies of agencies that regulate financial institutions. The Bank's cost of
funds is influenced by interest rates on competing investments and general
market rates of interest. Lending activities are influenced by the demand for
real estate loans and other types of loans, which in turn is affected by the
rates of interest at which loans are offered, general economic conditions
affecting loan demand, and the availability of funds for lending activities.
Recent Developments
On September 30, 1996, federal legislation was enacted that requires the Savings
Association Insurance Fund ("SAIF") to be recapitalized with a one-time
assessment on virtually all SAIF-insured institutions, such as the Bank, equal
to 65.7 basis points on SAIF-insured deposits maintained by those institutions
as of March 31, 1995. The amount of $61,888 which was paid to the FDIC by
November 27, 1996, was accrued by the Company at September 30, 1996.
-7-
<PAGE>
HBANCORPORATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
As a result of the SAIF recapitalization, the FDIC has amended its regulation
concerning the insurance premiums payable by SAIF-insured institutions.
Effective January 1, 1997, the SAIF insurance premium will range from 0 to 27
basis points per $100 of domestic deposits. Additionally, the FDIC has imposed a
Financing Corporation (FICO) assessment on SAIF-assessable deposits for the
first semiannual period of 1997 equal to 6.48 basis points.
Financial Condition
For the nine months ended March 31, 1997, total assets decreased approximately
$42,000 from $17.24 million to $17.20 million. Assets decreased as a result of a
decrease in cash and certificates of deposits offset by an increase in loans
receivable. Deposits decreased by approximately $213,000 to $8.7 million at
March 31, 1997, from $8.9 million at June 30, 1996. Management believes the
decrease in deposits stems from higher rates offered by competitors. For the
nine months ended March 31, 1997, total stockholders' equity increased
approximately $85,000 from $8.1 million to $8.2 million. The increase was a
result of increased net interest income offset by a one-time FDIC assessment fee
to recapitalize the SAIF insurance fund.
Results of Operations:
Comparison of the three months ended March 31, 1997 and 1996.
General. Net income increased to $76,000 for the three months ended March 31,
1997, compared to $48,000 for the same period in 1996. The increase was
primarily due to an increase in net interest income, offset by an increase in
general and administrative costs as a result of the conversion from a thrift to
a national bank, and an increase in income tax expense.
Interest Income. Total interest income increased by $85,000 or 31.5% to $356,000
for the three months ended March 31, 1997, compared to the same period last
year. Income from loans grew by $71,000 for the three months. Investment income
increased by $14,000 for the three months due primarily to higher yields on new
investments.
Interest Expense. Total interest expense decreased by $6,000 for the three
months ended March 31, 1997, to $111,000 compared to $117,000 in the previous
three month period. The amount of deposits have decreased compared to the same
period a year ago.
Net Interest Income. Net interest income before provision for loan losses
increased $91,000 or 58.9% for the recent three month period compared to the
same period a year ago, from $154,000 to $245,000.
Nonperforming Assets and Provisions for Loan Losses. The provision for loan
losses is a result of management's periodic analysis of the adequacy of the
Bank's allowance for loan losses. During the three month periods ended March 31,
1997 and 1996, no loan loss provision was recorded. The Bank continues to
monitor and adjust its allowance for loan losses as management's analysis of its
loan portfolio and economic conditions dictate.
-8-
<PAGE>
HBANCORPORATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Noninterest Income. Noninterest income remained substantially the same for the
three month period ended March 31, 1997, compared with the same period in 1996.
Noninterest Expense. For the three months ended March 31, 1997, the total
noninterest expense was $124,000 compared to $76,000 for the same three months
in 1996. This increase is due to increased general and administrative costs as a
result of becoming a public company.
Income Tax Expense. Income tax expense increased to $48,000 during the most
recent three months compared to $31,000 for the same period a year ago. The Bank
recorded a deferred tax liability of approximately $103,000 in response to the
probable conversion of the Association to a national bank and the subsequent
failure of the thrift definitional test, during the three month period ending
December 31, 1995. Tax laws in effect at that time required the Association to
reverse its tax bad debt reserve to the level allowed by a national bank over a
five year period. This deferred tax liability was recaptured during the three
month period ending June 30, 1996.
Comparison of the nine months ended March 31, 1997 and 1996.
General. Net income increased to $170,000 for the nine months ended March 31,
1997, compared to a loss of $36,000 for the same period in 1996. The increase
was primarily due to a $303,000 increase in net interest income, offset by a
one-time FDIC assessment fee of $62,144 to recapitalize the SAIF insurance fund.
Interest Income. Total interest income increased by $286,000 or 36.0% to
$1,079,000 for the nine months ended March 31, 1997, compared to the same period
last year. Income from loans grew by $184,000 for the nine months. Investment
income increased by $102,000 for the nine months due primarily to higher yields
on new investments.
Interest Expense. Total interest expense decreased by $17,000 for the nine
months ended March 31, 1997, to $339,000 compared to $356,000 in the previous
nine month period. The amount of deposits have decreased for the most recent
nine month period compared to the same period a year ago.
Net Interest Income. Net interest income before provision for loan losses
increased $303,000 or 69.3% for the recent nine month period compared to the
same period a year ago, from $437,000 to $740,000.
-9-
<PAGE>
HBANCORPORATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Nonperforming Assets and Provisions for Loan Losses. The provision for loan
losses is a result of management's periodic analysis of the adequacy of the
Bank's allowance for loan losses. During the nine month period ended March 31,
1997 and 1996, the Bank recorded a provision for additional loan losses of
$5,000. The Bank continues to monitor and adjust its allowance for loan losses
as management's analysis of its loan portfolio and economic conditions dictate.
The Bank believes it has taken an appropriate approach toward reserve levels,
consistent with the Bank's loan portfolio, the level of the Bank's allowance for
loan losses and any change in the related ratio of the allowance for loan losses
to non-performing loans are dependent upon the economy, changes in real estate
values and interest rates. Because the Bank has had extremely low loan losses
during its history, management also considers the loss experience of similar
portfolios in comparable lending markets. In addition, federal regulators may
require additional reserves as a result of their examination of the Bank.
Accordingly, the calculation of the adequacy of the allowance for loan losses is
not based directly on the level of nonperforming assets. The allowance for loan
losses reflects what the Bank currently believes is an adequate level of
resources, although there can be no assurance that future losses will not exceed
the estimated amounts, thereby adversely affecting future results of operations.
As of March 31, 1997, the Bank's allowance for loan losses was $123,000 compared
to $118,000 at June 30, 1996.
The Bank had no nonperforming assets at March 31, 1997 or June 30, 1996.
Noninterest Income. Noninterest income remained substantially the same for the
nine month period ended March 31, 1997, compared with the same period in 1996.
Noninterest Expense. For the nine months ended March 31, 1997, the total
noninterest expense was $455,000 compared to $300,000 for the same nine months
in 1996. General and administrative costs have increased approximately $40,000
as a result of becoming a publicly traded company. Deposit insurance premiums
increased $60,000 for the nine months ended March 31, 1997, compared with the
same period in 1996. This increase is due to a one-time FDIC assessment fee to
recapitalize the SAIF insurance fund.
Income Tax Expense. Income tax expense decreased to $115,000 during the most
recent nine months compared to $173,000 for the same period a year ago. Lower
taxes were the result of the recapture of deferred income taxes which had been
recorded in response to the probable conversion of the Association to a national
bank and the subsequent failure of the thrift definitional test. Tax laws
required the Association to reverse its bad debt reserve to the level allowed by
a national bank over a five year period, and record the respective income tax
liability.
Capital Requirements. The Company's main sources of funds are deposits and loan
and investment repayments. Other potential sources would include borrowings from
the Federal Home Loan Bank of Chicago (FHLB). As a national bank, the Bank is
not subject to any prescribed liquidity requirement.
-10-
<PAGE>
HBANCORPORATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The Bank uses its capital resources to meet ongoing commitments, to fund
maturing certificates of deposit and deposit withdrawals, to invest, to fund
existing and future loan commitments, to maintain liquidity, and to meet
operating expenses. The company anticipates it will have sufficient funds to
meet current loan commitments. At March 31, 1997, the Bank had no outstanding
commitments to extend credit. Management believes loan repayments and other
sources of funds will be adequate to meet the Bank's foreseeable liquidity
needs. FHLB advances could be used to take advantage of investment
opportunities, but are not relied upon in the regular course of business.
The Bank is required to maintain specific amounts of regulatory capital pursuant
to federal regulations. The table below presents the capital position at March
31, 1997 relative to the regulatory capital requirements for the Bank.
Amount
(in thousands)
----------------
Tier 1 Capital $ 6,017
Tier 1 Capital Requirement 513
----------------
Excess $ 5,504
================
Total Risk-Based Capital $ 6,140
Risk-Based Capital Requirement 964
----------------
Excess $ 5,176
================
-11-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Company or
the Bank is a party or of which any of their property is
subject. From time-to-time, the Bank is a party to legal
proceedings incident to its business.
Item 2. None
The Company filed a Form 8-K, dated January 7, 1997, announcing
its name change to HBancorporation, Inc.
Item 3. None.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) On April 28, 1997, HBancorporation, Inc. (the "Company") held a Special
Meeting of Stockholders to approve (i) the adoption of the Company's 1997 Stock
Option and Incentive Plan and (ii) the adoption of the Company's Recognition and
Retention Plan.
(b) At that meeting, the stockholders voted on the following
matters:
(i) The approval of the 1997 Stock Option and Incentive Plan;
BROKER
VOTES: FOR AGAINST ABSTAIN NON-VOTES
------ --- ------- ------- ---------
312,025 14,700 625 -0-
(ii) The approval of the Recognition and Retention Plan
BROKER
VOTES: FOR AGAINST ABSTAIN NON-VOTES
------ --- ------- ------- ---------
310,725 16,000 625 -0-
Accordingly, both proposals were approved by the Company's
Stockholders.
Item 5. None.
Item 6. Exhibits and Reports on Form 8-K
-12-
<PAGE>
SIGNATURES
----------
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HBANCORPORATION, INC.
Registrant
Date: April 30, 1997 /s/ Kevin J. Kavanaugh
-------------------- -----------------------------------------
Kevin J. Kavanaugh, President and Chief
Executive Officer
Date: April 30, 1997 /s/ Cleora Gillespie
-------------------- -----------------------------------------
Cleora Gillespie, Secretary and Treasurer
-13-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY
REPORT ON FORM 10-QSB FOR THE FISCAL QUARTER ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1997
<CASH> 128,653
<INT-BEARING-DEPOSITS> 1,444,443
<FED-FUNDS-SOLD> 225,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,063,992
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 1,027,031
<LOANS> 12,895,956
<ALLOWANCE> (123,417)
<TOTAL-ASSETS> 17,196,218
<DEPOSITS> 8,699,844
<SHORT-TERM> 0
<LIABILITIES-OTHER> 253,080
<LONG-TERM> 0
0
0
<COMMON> 4,933
<OTHER-SE> 8,238,361
<TOTAL-LIABILITIES-AND-EQUITY> 17,196,218
<INTEREST-LOAN> 287,036
<INTEREST-INVEST> 68,755
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 355,791
<INTEREST-DEPOSIT> 111,171
<INTEREST-EXPENSE> 111,171
<INTEREST-INCOME-NET> 244,620
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 123,992
<INCOME-PRETAX> 123,496
<INCOME-PRE-EXTRAORDINARY> 123,496
<EXTRAORDINARY> 0
<CHANGES> 47,950
<NET-INCOME> 75,546
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> (123,417)
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> (123,417)
<ALLOWANCE-DOMESTIC> (123,417)
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
