UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
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 September 30, 1998, 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
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Financial Condition at September 30, 1998
and June 30, 1998 1
Consolidated Statements of Income for the three months ended
September 30, 1998 and 1997 2
Consolidated Statement of Changes in Stockholders' Equity for the
three months ended September 30, 1998 and 1997 3
Consolidated Statements of Cash Flows for the three months
ended September 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-9
Part II. Other Information
Item 1. Legal Proceedings 10
Item 2. Exhibits and Reports on Form 8-K 10
Item 3. Stockholders Voting 10
Signatures 11
</TABLE>
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(Unaudited)
September 30, June 30,
1998 1998
------------ ------------
ASSETS
<S> <C> <C>
Cash and equivalents:
Cash $ 128,474 $ 612,736
Interest bearing deposits 3,847,950 2,120,840
------------ ------------
Total cash and cash equivalents 3,976,424 2,733,576
Investments available for sale at fair value 1,510,517 1,628,638
Investments held to maturity at cost 3,020,047 1,022,166
Loans receivable, net 15,146,387 15,582,966
Federal Home Loan Bank stock at cost 87,500 87,500
Federal Reserve Bank stock at cost 67,800 67,800
Accrued interest receivable 268,608 247,437
Office property and equipment, net 52,277 51,451
Other assets 38,310 36,716
------------ ------------
Total Assets $ 24,167,870 $ 21,458,250
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Passbook savings $ 2,606,456 $ 1,871,150
Money market accounts 397,607 681,126
Certificates of deposit 8,660,383 7,969,700
Certificates of deposit $100,000 and over 3,287,472 1,771,564
------------ ------------
Total Deposits 14,951,918 12,293,540
Advances from FHLB 1,750,000 1,750,000
Other Liabilities: 436,900 365,237
------------ ------------
Total Liabilities 17,138,818 14,408,777
------------ ------------
Stockholders' Equity:
Common stock, $.01 par value, 2 million shares authorized,
493,320 shares issued; 403,460 shares outstanding at
September 30, 1998; and 409,560 shares outstanding at
June 30, 1998 4,933 4,933
Additional paid in capital 4,543,776 4,540,644
Retained earnings 4,202,936 4,166,189
Treasury stock at cost (1,433,378) (1,359,078)
Net unrealized appreciation on available-for-sale securities
net of deferred tax 178,250 164,250
Unearned ESOP and recognition and retention shares (467,465) (467,465)
------------ ------------
Total Stockholders' Equity 7,029,052 7,049,473
------------ ------------
Total Liabilities and Stockholders' Equity $ 24,167,870 $ 21,458,250
============ ============
</TABLE>
See notes to consolidated financial statements.
-1-
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended
September 30,
------------------
(Unaudited)
1998 1997
-------- --------
<S> <C> <C>
INTEREST INCOME
Loans receivable $358,379 $337,244
Investments 113,559 74,292
-------- --------
Total Interest Income 471,938 411,536
-------- --------
INTEREST EXPENSE
Interest on deposits 173,512 115,765
Interest on FHLB advances 24,721 8,100
-------- --------
Total Interest Expense 198,233 123,865
-------- --------
Net Interest Income 273,705 287,671
Provision for Loan Losses 5,000 -0-
-------- --------
Net interest income after provision for loan losses 268,705 287,671
-------- --------
NONINTEREST INCOME
Customer service fees and other 6,726 5,768
-------- --------
Total Noninterest Income 6,726 5,768
-------- --------
NONINTEREST EXPENSES
General and administrative
Compensation and benefits 91,190 78,182
Occupancy and equipment 11,471 8,943
Deposit insurance premium 5,189 4,780
SAIF assessment fee -0- -0-
Computer expense 3,794 4,033
Other 32,683 36,171
-------- --------
Total Noninterest Expenses 144,327 132,109
-------- --------
INCOME BEFORE INCOME TAX 131,104 161,330
Income Tax Expense 61,602 69,500
-------- --------
NET INCOME $ 69,502 $ 91,830
======== ========
Earnings Per Share:
Primary $ 0.14 $ 0.19
======== ========
Fully diluted $ 0.14 $ 0.19
======== ========
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Common Paid in Retained Treasury
Stock Capital Earnings Stock
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, June 30, 1997 $ 4,933 $ 4,514,279 $ 4,015,104 $ (26,838)
Net income for the quarter ended
September 30, 1997 0 0 91,830 0
Cash dividends 0 0 (39,468) 0
Change in net unrealized gain on securities
available-for-sale, net of applicable
deferred income taxes of $84,000 0 0 0 0
Effect of contribution to fund ESOP 0 6,248 0 0
Purchase of treasury stock 0 0 0 (439,867)
----------- ----------- ----------- -----------
BALANCE, September 30, 1997 $ 4,933 $ 4,520,527 $ 4,067,466 $ (466,705)
=========== =========== =========== ===========
BALANCE, June 30, 1998 $ 4,933 $ 4,540,644 $ 4,166,189 $(1,359,078)
Net income for the quarter ended
September 30, 1998 0 0 69,502 0
Cash dividends 0 0 (32,755) 0
Change in unrealized gain on securities
available-for-sale, net of applicable
deferred income taxes of $125,250 0 0 0 0
Effect of contribution to fund ESOP 0 3,132 0 0
Purchase of treasury stock 0 0 0 (74,300)
----------- ----------- ----------- -----------
BALANCE, September 30, 1998 $ 4,933 $ 4,543,776 $ 4,202,936 $(1,433,378)
=========== =========== =========== ===========
<CAPTION>
Unrealized Unearned RRP
Gain (Loss) Compen- Compen- Total
Securities sation sation Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, June 30, 1997 $ 111,500 $ (335,453) $ 0 $ 8,283,525
Net income for the quarter ended
September 30, 1997 0 0 0 91,830
Cash dividends 0 0 0 (39,468)
Change in net unrealized gain on securities
available-for-sale, net of applicable
deferred income taxes of $84,000 8,500 0 0 8,500
Effect of contribution to fund ESOP 0 0 0 6,248
Purchase of treasury stock 0 0 0 (439,867)
----------- ----------- ----------- -----------
BALANCE, September 30, 1997 $ 120,000 $ (335,453) $ 0 $ 7,910,768
=========== =========== =========== ===========
BALANCE, June 30, 1998 $ 164,250 $ (295,988) $ (171,477) $ 7,049,473
Net income for the quarter ended
September 30, 1998 0 0 0 69,502
Cash dividends 0 0 0 (32,755)
Change in unrealized gain on securities
available-for-sale, net of applicable
deferred income taxes of $125,250 14,000 0 0 14,000
Effect of contribution to fund ESOP 0 0 0 3,132
Purchase of treasury stock 0 0 0 (74,300)
----------- ----------- ----------- -----------
BALANCE, September 30, 1998 $ 178,250 $ (295,988) $ (171,477) $ 7,029,052
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended
September 30,
----------------------------------
(Unaudited)
1998 1997
----------- -----------
<S> <C> <C>
NET INCOME (Loss) $ 69,502 $ 91,830
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 4,575 3,039
(Increase) decrease in other assets (1,594) 1,839
(Increase) in interest receivable (21,171) (47,124)
Increase in other liabilities 71,663 75,434
Provision for loan loss 5,000 -0-
----------- -----------
Cash provided by operating activities 127,975 125,018
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in certificates of deposit in other
financial institutions, net decrease -0- 100,000
Proceeds from maturities of investments held to maturity 4,184 659
Purchase of investments held to maturity (2,002,065) -0-
Proceeds from maturities of investments available-for-sale 132,121 -0-
Purchase of investments available-for-sale -0- (1,013,534)
Purchase of fixed assets (5,401) (1,256)
Net (increase) decrease in loans 431,579 (442,773)
----------- -----------
Cash (used) by investing activities (1,439,582) (1,356,904)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from FHLB -0- 1,000,000
Payment of dividends (32,755) (39,468)
Allocation of ESOP shares 3,132 6,248
Net increase in passbook savings, money market accounts
and certificates of deposit 2,658,378 763,036
Purchases of treasury stock (74,300) (439,867)
----------- -----------
Cash provided by financing activities 2,554,455 1,289,949
----------- -----------
Net increase in cash and cash equivalents 1,242,848 58,063
Cash and Cash Equivalents at Beginning of Period 2,733,576 1,650,294
----------- -----------
Cash and Cash Equivalents at End of Period $ 3,976,424 $ 1,708,357
=========== ===========
Cash paid for:
Interest $ 175,894 $ 115,862
=========== ===========
Income taxes $ 19,879 $ 21,481
=========== ===========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
HBANCORPORATION, INC.
LAWRENCEVILLE, ILLINOIS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
NOTE 1 - BASIS OF PRESENTATION
The unaudited information for the quarters ended September 30, 1998 and 1997,
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
HBancorporation, Inc. for the fiscal year ended June 30, 1998. The results of
the periods 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 OTC Electronic Bulletin Board under the
symbol "HBIN".
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
SEPTEMBER 30, 1998 AND 1997
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 - EMPLOYEE BENEFIT AND STOCK OPTION PLANS
On April 28, 1997, the stockholders' approved the HBancorporation, Inc.
Recognition and Retention Plan. The purpose of this plan is to provide
directors, officers and employees with a proprietary interest in the Company in
a manner designed to encourage such individuals to remain with the Company and
the Bank. The terms of each RRP will be identical, only the participants and the
number of shares awarded to each participant vary. Eligible directors, officers
and other key employees of the Company will earn (i.e., become vested in) shares
of common stock covered by the award at a rate not to exceed 20% per year, with
the first installment vesting April 28, 1997.
On April 28, 1997, the stockholders approved the HBancorporation, Inc. 1997
Stock Option and Incentive Plan. Pursuant to the Stock Option Plan, the Company
will reserve for issuance thereunder either from authorized but unissued shares
or from issued shares reacquired and held as treasury shares, 59,198 shares of
Common Stock (12.0% of the Company's current shares outstanding). Management
currently intends, to the extent practicable and feasible, to fund the Stock
Option Plan from issued shares reacquired by the Company in the open market.
Awards under the plan may be in the form of stock options, stock appreciation
rights or limited stock appreciation rights. Awards made under the plan vest at
a rate of one-fifth of the initial award per year, subject to the participant
maintaining continuous service since the date of grant.
NOTE 5 - EARNINGS PER SHARE
Primary earnings per share amounts for the three months ended September 30, 1998
and 1997 are computed based on the weighted-average number of shares actually
outstanding, 486,266 in 1998, and 485,130 in 1997. Fully diluted earnings per
share amounts are based on an increased number of shares that would be
outstanding assuming exercise of the stock options and RRP awards. The number of
shares used in the computations of fully diluted earnings per share for the
three months ended September 30, 1998 and 1997 were 495,062 and 495,055,
respectively.
-6-
<PAGE>
HBANCORPORATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Forward-Looking Statements
When used in this filing and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases "would be,"
"will allow," "intends to," "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and uncertainties, including but not limited to changes in economic
conditions in the Company's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the Company's
market area and competition, all or some of which could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected.
The Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made, and
advises readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities and competitive and regulatory
factors, could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from those
anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation,
to update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.
Impact of the Year 2000
The Company has conducted a comprehensive review of its computer systems to
identify applications that could be affected by the "Year 2000" issue, and has
developed an implementation plan to address the issue. The Company's data
processing is performed by an outside service bureau. The Company has already
contacted each vendor to request time tables for year 2000 compliance and
expected costs, if any, to be passed along to the Company. To date, the Company
has been informed that its primary service providers anticipate that all
reprogramming efforts will be completed by December 31, 1999, allowing the
Company adequate time for testing. Certain other vendors have not yet responded,
however, the Company will pursue other options if it appears that these vendors
will be unable to comply. Management does not expect these costs to have a
significant impact on its financial position or results of operations however,
there can be no assurance that the vendors systems will be 2000 compliant,
consequently the Company could incur incremental costs to convert to another
vendor. The Company has identified certain of its hardware and software
equipment that will not be Year 2000 compliant and intends to purchase new
equipment and software prior to March 31, 1999. These capital expenditures are
expected to total approximately $20,000.
General
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 owns all the stock of the Bank.
The Company had not engaged in any material operations at September 30, 1998,
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.
Financial Condition
For the three months ended September 30, 1998, total assets increased
approximately $2,710,000 from $21.5 million to $24.2 million. Assets increased
as a result of an increase in investments available for sale. Deposits increased
by approximately $2,660,000 to $15.0 million at September 30, 1998, from $12.3
million at June 30, 1998. Management believes the increase in deposits stems
from customers seeking higher yielding investment alternatives. For the three
months ended September 30, 1998, total stockholders' equity decreased
approximately $20,000. The decrease was primarily a result of the purchase of
treasury stock and payment of dividends offset by net income.
-7-
<PAGE>
HBANCORPORATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Results of Operations:
Comparison of the three months ended September 30, 1998 and 1997.
General. Net income decreased to $69,000 for the three months ended September
30, 1998, compared to $92,000 for the same period in 1997. The decrease was
primarily related to higher interest expense on deposits and FHLB advances.
Interest Income. Total interest income increased by $60,000 or 14.6% to $472,000
for the three months ended September 30, 1998, compared to the same period last
year. Income from loans grew by $21,000 for the three months. Investment income
increased by $39,000 for the three months due primarily to the purchase of
investment securities.
Interest Expense. Total interest expense increased by $74,000 for the three
months ended September 30, 1998, to $198,000 compared to $124,000 in the
previous three month period. The amount of certificates of deposit have
increased substantially for the most recent three month period compared to the
same period a year ago. The Bank paid $25,000 interest to FHLB on advances for
the three months ended September 30, 1998.
Net Interest Income. Net interest income before provision for loan losses
decreased $14,000 or 4.9% for the recent three month period compared to the same
period a year ago, from $288,000 to $274,000.
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 period ended September
30, 1998 the Bank recorded a $5,000 provision for loan losses, compared to no
provision for the three month period ended September 30, 1997. 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 September 30, 1998 and June 30, 1998, the Bank's allowance for loan losses
was $138,000 and $133,000, respectively.
The Bank had no nonperforming assets at September 30, 1998 or June 30, 1998.
There was no foreclosed real estate owned by the Bank at September 30, 1998 or
June 30, 1998.
Noninterest Income. Noninterest income was substantially the same for the three
month periods ended September 30, 1998 and 1997.
Noninterest Expense. For the three months ended September 30, 1998, the total
noninterest expense was $144,000 compared to $132,000 for the same three months
in 1997. General and administrative costs have increased as a result of the ESOP
and the RRP.
-8-
<PAGE>
HBANCORPORATION, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Income Tax Expense. Income tax expense decreased to $62,000 during the most
recent three months compared to $70,000 for the same period a year ago. Lower
taxes were the result of decreased income before tax of $131,000 for the most
recent three months compared to $161,000 for a year ago.
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.
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 September 30, 1998, 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
September 30, 1998 relative to the regulatory capital requirements for the Bank.
Amount
(in thousands)
----------------
Tier 1 Capital $ 6,353
Tier 1 Capital Requirement 719
----------------
Excess $ 5,634
================
Total Risk-Based Capital $ 6,491
Risk-Based Capital Requirement 1,215
----------------
Excess $ 5,276
================
-9-
<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. Exhibits and Reports on Form 8-K
Form 8K filed August 5, 1998 Amending By-Laws
Item 3. (a) On October 27, 1998, HBancorporation, Inc., (the "Corporation")
held its Annual Meeting of Stockholders
(b) At the meeting, Kevin J. Kavanaugh and Mary E. Denison were
elected for terms to expire in 2001.
(c) Stockholders voted on the following matters:
i) The election of the following two directors of the
Corporation;
<TABLE>
<CAPTION>
VOTES: FOR AGAINST ABSTAIN BROKER-NON-VOTES
------ --- ------- ------- ----------------
<S> <C> <C> <C> <C>
Kevin J. Kavanaugh 375,496 0 4,970 0
Mary E. Denison 375,496 0 4,970 0
ii) The ratification of the appointment of Kemper CPA Group,
L.L.C. as independent auditors of the corporation for the fiscal year
ending June 30, 1998
<CAPTION>
VOTES: FOR AGAINST ABSTAIN BROKER-NON-VOTES
------ --- ------- ------- ----------------
<S> <C> <C> <C> <C>
375,996 4,470 0 0
</TABLE>
-10-
<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: November 3, 1998 /s/ Kevin J. Kavanaugh
-----------------------------------------
Kevin J. Kavanaugh, President and Chief
Executive Officer
Date: November 3, 1998 /s/ Cleora Gillespie
-----------------------------------------
Cleora Gillespie, Secretary and Treasurer
-11-
