<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
(Mark One)
( x ) Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Period Ended September 30, 1997.
( ) Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from ___ to ___.
Commission File Number: 0-18284
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HOMECORP, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 36-3680814
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(State of Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification Number
1107 East State Street, Rockford, IL 61104-2259
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(Address of Principal Executive Offices) (ZIP Code)
815-987-2200
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(Issuer's Telephone Number, including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days.
Yes x No
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As of September 30, 1997 there were 1,707,527 issued and outstanding shares of
the Issuer's Common Stock.
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HOMECORP, INC.
AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of September 30, 1997
(unaudited) and December 31, 1996 1
Statements of Earnings
(unaudited) for the three and nine months
ended September 30, 1997 and 1996 2
Statements of Cash Flows
(unaudited) for the three and nine months
ended September 30, 1997 and 1996 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 6
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
Signatures
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<TABLE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED) HOMECORP, INC.
(IN THOUSANDS) AND SUBSIDIARY
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September 30, December 31,
1997 1996
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<S> <C> <C>
ASSETS:
Cash and cash equivalents:
Cash and non-interest bearing deposits $ 11,648 $ 13,959
Interest bearing deposits 178 181
Federal funds sold - -
Total cash and cash equivalents 11,826 14,140
Securities available for sale, at fair value 11,729 12,497
Investment securities (approximate market value of
$5,385 in 1997 and $5,471 in 1996) 5,501 5,502
Mortgage-backed securities (approximate market value of
$16,183 in 1997 and $18,577 in 1996) 16,342 18,859
Federal Home Loan Bank Stock, at cost 1,637 2,079
Loans receivable, net 261,917 259,140
Loans held for sale 2,190 1,872
Real estate acquired in settlement of loans 5,288 9,648
Investment in real estate developments 3,738 5,095
Premises and equipment 3,604 3,869
Other assets, principally accrued interest 3,105 3,123
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Total Assets $326,877 $335,824
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LIABILITIES:
Deposits $299,148 $311,754
Borrowed funds 2,400 -
Advance payments by borrowers for taxes and insurance 526 1,330
Other liabilities 2,481 1,882
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Total Liabilities $304,555 $314,966
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SHAREHOLDERS' EQUITY:
Preferred stock-Par Value $0.1; 1,000,000 share authorized;
none outstanding - -
Common stock-Par Value $.01; 5,000,000 shares authorized;
1,707,527 and 1,128,779 shares issued and outstanding
for 1997 and 1996. 17 11
Paid-in capital 6,610 6,493
Retained earnings 15,674 14,332
Unrealized gain on securities available
for sale net of taxes 21 22
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Total Shareholders' Equity $ 22,322 $20,858
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Total Liabilities and Shareholders' Equity $326,877 $335,824
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</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) HOMECORP, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA) AND SUBSIDIARY
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Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans receivable $ 5,548 $ 5,524 $16,220 $16,172
Mortgage-backed securities 249 297 799 946
Securities available for sale 177 187 585 486
Investment securities and other 131 126 541 569
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Total interest income 6,105 6,134 18,145 18,173
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INTEREST EXPENSE:
Deposits 3,657 3,678 10,878 11,032
Borrowed Funds 12 74 15 74
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Total interest expense 3,669 3,752 10,893 11,106
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Net interest income 2,436 2,382 7,252 7,067
Provision for loan losses 80 175 220 395
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Net interest income after
provision for loan losses 2,356 2,207 7,032 6,672
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NON-INTEREST INCOME:
Fees and service charges 481 436 1,416 1,252
Gain (loss) on sale of:
Loans receivable 139 181 303 729
Securities available for sale - - (9) -
Income from real estate developments 272 388 1,021 375
Operations of real estate owned 120 120 361 351
Other 21 22 142 106
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Total non-interest income 1,033 1,147 3,234 2,813
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NON-INTEREST EXPENSE:
Compensation and benefits 1,436 1,264 4,111 3,773
Office occupancy and equipment 311 305 959 923
Data processing 223 232 644 673
Federal deposit insurance premium 126 228 339 634
SAIF special assessment - 2,043 - 2,043
Other 517 539 1,536 1,434
Provision for loss on foreclosed
real estate - - 505 -
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Total non-interest expense 2,613 4,611 8,094 9,480
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Income before income taxes 776 (1,257) 2,172 5
Income taxes 295 (501) 830 (5)
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Net income $ 481 $ (756) $ 1,342 $ 10
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Earnings per common and
common equivalent share $ 0.26 $ (0.42) $ 0.74 $ 0.01
======= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) HOMECORP, INC.
(IN THOUSANDS) AND SUBSIDIARY
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Nine Months Ended
September 30,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,342 $ 10
Adjustment to reconcile net income to
net cash (used in) operating activities:
Amortization of:
Premiums and discounts on loans, and
mortgage-backed and investment securities 48 109
Net (income)/loss from real estate developments (1,021) (375)
Provision for loan losses 220 395
Provision for loss on foreclosed real estate 505 -
Net (gain) loss on sale of:
Loans receivable (303) (729)
Securities available for sale 9 -
Depreciation and amortization of premises and equipment 331 347
Decrease (Increase) in loans held for sale (317) 3,148
Increase (Decrease) in cash flows due to changes in:
Accrued interest and other assets 18 (454)
Accrual for SAIF Special Assessment - 2,043
Deferred taxes and other liabilities 599 (46)
Total adjustments 89 4,438
Net cash provided by (used in) operating activities 1,431 4,448
Cash flows from investing activities:
Loan originations, net of principal payments on loans (1,396) (4,196)
Purchases of:
Loan participations (3,304) (5,202)
Securities available for sale (6,526) (6,997)
Investment securities (2,000) (1,500)
Certificates of deposit - (7,000)
Premises and equipment (66) (147)
Investment in foreclosed real estate 25 (24)
Investment in real estate developments (312) (977)
Principal payments on mortgage-backed securities 2,446 4,688
Principal repayments of securities available for sale 771 1,086
Proceeds from sales of:
Securities available for sale 2,506 -
Real estate developments - 67
Foreclosed real estate 4,382 61
Proceeds from maturities of:
Certificates of deposit - 7,000
Investment securities 2,000 2,500
Securities available for sale 4,000 1,986
Redemption of investments required by law 442 172
Distributions of income on real estate partnerships 2,690 147
Net cash provided by investing activities 5,658 (8,336)
Cash flows from financing activities:
Net increase (decrease) in borrowings 2,400 8,300
Net increase (decrease) in deposits (12,607) (6,473)
Net increase (decrease) in advance payments by
borrowers for taxes and insurance 804 (1,402)
Net cash used in financing activities (9,403) 425
</TABLE>
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<TABLE>
<S> <C> <C>
Net increase (decrease) in cash and cash equivalents (2,314) (3,463)
Cash and cash equivalents at beginning of year 14,140 10,412
Cash and cash equivalents at end of year 11,826 6,949
Supplemental Cash and disclosures of cash flow information
payment during the period for:
Interest 10,795 10,873
Taxes 256 240
</TABLE>
HOMECORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) MANAGEMENT'S STATEMENT
In the opinion of management the accompanying unaudited financial
statements contain all adjustments (all of which are normal and recurring
in nature) necessary to present fairly the financial position of HomeCorp,
Inc. and Subsidiary (the Company) at September 30, 1997 and December 31,
1996 and the results of operations and cash flows for the nine month
periods ended September, 1997 and 1996. The Notes to the Consolidated
Financial Statements which are contained in the 1996 Annual Report to
Shareholders and incorporated by reference into the 1996 Form 10-K should
be read in conjunction with these Consolidated Financial Statements.
(2) SUBSEQUENT EVENT
HomeCorp entered into a merger agreement with Mercantile Bancorporation of
St. Louis, Missouri on October 29, 1997. The merger is structured as a
tax-free exchange with HomeCorp shareholders receiving .4968 shares of
Mercantile common stock for each share of HomeCorp common stock. The
merger is subject to certain conditions including approval of HomeCorp
shareholders and all appropriate regulatory authorities.
(3) LOANS RECEIVABLE
Following is a summary of loans receivable for the dates indicated:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
(In Thousands) 1997 1996
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<S> <C> <C>
Conventional first mortgage loans $162,590 $168,848
Short-term construction and land loans 17,226 15,243
Commercial business loans 8,502 6,243
Auto and boat loans 54,946 53,325
Home equity and improvement loans 25,104 21,168
Other consumer loans 1,062 1,298
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Total loans receivable, gross $269,430 $266,125
</TABLE>
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<TABLE>
<S> <C> <C>
Less:
Loans in process 6,158 5,639
Deferred loan origination costs (434) (446)
Unearned discount, principally on
loans purchased 171 210
Allowance for possible loan losses 1,618 1,582
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Total loans receivable net $261,917 $259,140
======== ========
</TABLE>
Adjustable rate loans totaled $109.2 million and $100.9 million at
September 30, 1997 and December 31, 1996, respectively. The Bank serviced
first mortgage loans for other institutions approximating $164.0 million
and $162.9 million at September 30, 1997 and December 31, 1996,
respectively.
The following summarizes activity in the allowance for loan losses for the
three month periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
(In Thousands) 1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Balance at beginning of period $1,580 $1,365 $1,582 $1,175
Charge-offs (44) (89) (194) (122)
Recoveries 2 1 10 4
Provision for possible loan losses 80 175 220 395
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Balance at end of period $1,618 $1,452 $1,618 $1,452
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</TABLE>
Total impaired loans at September 30, 1997 were $1.8 million, all of which
were in non-accrual status.
In addition to residential and commercial mortgage loans and consumer loans
90 days or more delinquent at September 30, 1997, which totaled $347,000,
two participating interests totaling $1.4 million were greater than ninety
days delinquent. The participating interests represent interests in loans
to a single borrower and are secured by multi-family properties located in
Southern Wisconsin. The underlying borrower sold the properties on contract
to an individual that ultimately declared bankruptcy. The properties have
been cleared from the bankruptcy proceedings and the original borrower is
completing a plan to return the loans to current status.
A total of $73,000 in interest income was recognized during the first nine
months of 1997 on impaired loans. A total of $63,000 was recognized on the
two delinquent participations discussed above. An additional $85,000 of
interest income would have been recognized had the nonaccruing impaired
loans remained current. The average recorded investment in impaired loans
during the nine months ended September 30, 1997 was approximately $2.4
million.
<PAGE>
The Bank has no restructured loans at September 30, 1997.
(4) EARNINGS PER SHARE
The Company's outstanding common shares have been adjusted for all periods
presented to reflect the impact of the three-for-two stock split declared
by the Board of Directors on April 22, 1997.
Earnings per share for the three and nine months ended September 30, 1997
were computed by dividing net income by 1,803,275 and 1,800,640, the
average number of common and common equivalent shares (using the treasury
share method) outstanding, respectively. The Company's equivalent shares
consist entirely of common stock options.
Earnings per share for the three and nine months ended September 30, 1996
were computed by dividing net income by 1,763,308 and 1,761,700, the
weighted average number of shares outstanding during the respective periods
as adjusted for the dilutive effect of common stock options.
(5) NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share", which is required to be adopted on December
31, 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact is
expected to result in an increase in primary earnings per share for the
three and nine months ended September 30, 1997 of $.02 and $.05,
respectively. The impact is expected to result in an increase in primary
loss per share of $.03 for the three months ended September 30, 1996. There
is no expected impact upon the earnings per share for the nine months ended
September 30, 1996. The impact of Statement 128 on the calculation of fully
diluted earnings per share for these quarters is not expected to be
material.
(6) FINANCIAL DATA SCHEDULE
Prior period financial data schedules have not been restated to reflect the
impact of the Company's three-for-two stock split declared by the Board of
Directors on April 22, 1997.
HOMECORP, INC.
AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
<PAGE>
FORWARD-LOOKING STATEMENTS
When used in this Form 10-Q 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, and 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" 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 certain risks and uncertainties, that
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. The Company wishes to advise readers that the factors
listed below could affect the Company's financial performance and could cause
the Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
The Company does not undertake -- and specifically declines any obligation -- to
publicly release the result of any revisions which may be made to any forward-
looking statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated events.
FINANCIAL CONDITION
The Company's September 30, 1997 balance sheet reflects the continuing focus
upon community banking. The consumer loan portfolio increased $5.3 million, or
7% during the first nine months of 1997 while the commercial business loan
portfolio increased $2.3 million, or 36%. Consumer growth was largely due to
increased equity lines of credit. The Bank has specifically promoted line usage
to current customers as well as the origination of new lines. The Bank's
indirect automobile loan portfolio increased approximately 1% during 1997. The
reduced growth rate as compared to prior years is the result of increased
principal repayments as the portfolio has seasoned as well as lower origination
volumes which, it is believed, are the result of generally lower automobile
sales in the Bank's market area. Growth was also generated in home equity and
improvement loans, a result of targeted loan promotions during the first half of
1997. The Bank's involvement with the business community continues to provide
steady growth in the commercial loan portfolio. Relationships established
through business lending generally result in the Bank providing additional
services as well, such as checking and related services.
The mortgage loan portfolio decreased $4.8 million, or 3% during the first nine
months of 1997. Two participations totaling $3.6 million were repaid during
1997. Included with mortgage loans is the Bank's construction portfolio, which
increased $952,000 in net outstanding balance during the nine months ended
September 30, 1997. The Bank continues to sell all fixed interest rate one to-
four family mortgage loans originated as well as certain adjustable rate loans.
<PAGE>
Investment in real estate developments decreased $1.4 million during the first
nine months of 1997 due to one real estate partnership distributing $2.5 million
in undistributed earnings to the Bank's subsidiary during the third quarter.
This partnership, containing developed residential and commercial land,
represented the entire investment in real estate at September 30, 1997. The
Company sold its interest in two real estate development partnerships during
1997 at a small gain. The partnerships each contained a single developed
commercial lot.
Investment in foreclosed real estate decreased $4.4 million to $5.3 million due
to the third quarter sale of a parcel of land located in Michigan. A provision
for loss had been recognized for this parcel prior to third quarter.
Deposits of the Bank declined between September 30, 1997 and December 31, 1996.
Declines were noted in most deposit areas and maturities except for short term
certificates of deposit which increased $1.7 million. The Bank continues to
focus upon the generation of what are considered core banking relationships.
The Bank's suit in the United States Court of Federal Claims against the United
States for breach of contract with regard to the utilization as capital of the
supervisory goodwill, which was created when the Bank acquired failing
institutions in the 1980's, has been stayed pending the outcome of an appeal in
another case that was heard by the U.S. Supreme Court. While the Supreme Court
ruled favorably on the issue in the other case, the Company's suit has yet to
be heard.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the yields on average
interest-earning assets as well as the cost of average interest-bearing
liabilities. The table does not reflect the impact of income taxes. All
averages are monthly average balances.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Mortgage loans 8.36% 8.04% 8.26% 7.95%
Consumer loans 8.28 8.38 8.16 8.28
Commercial loans 9.65 9.32 9.40 9.33
Other earning assets 6.04 5.89 6.04 5.79
---- ---- ---- ----
Total interest-earning assets 8.09 7.85 7.95 7.72
---- ---- ---- ----
Deposits 4.96 4.86 4.86 4.83
Borrowings 5.44 5.64 5.48 5.64
---- ---- ---- ----
4.96 4.88 4.86 4.83
---- ---- ---- ----
Interest rate spread 3.13% 2.97% 3.09% 2.89%
==== ==== ==== ====
Net interest rate margin 3.23% 3.05% 3.18% 3.00%
==== ==== ==== ====
</TABLE>
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 VS 1996:
Net income totaled $481,000 during the third quarter of 1997. The third quarter
of 1996 included a $2.0 million charge for the recapitalization of the Federal
Deposit Insurance Corporation (FDIC) Savings Association Insurance Fund (SAIF).
This charge, representing $1.2 million net of income taxes resulted in a loss of
$756,000 during third quarter 1996.
Net Interest Income
- -------------------
The Company's net interest margin increased to 3.23% during the third quarter of
1997 from 3.05% during third quarter 1996. The asset yield increased to 8.09%
from 7.85% while the Company's cost of funds increased to 4.96% from 4.88%. The
increased asset yield resulted from consumer loan portfolio growth and increased
yields in the mortgage and commercial loan portfolios. Consumer originations
continued to provide portfolio growth, while the equity line of credit portfolio
provided an asset capable of immediately responding to changes in interest
rates. The mortgage portfolio contains six month adjustable ARMS and
construction loans which are both responsive to interest rate changes. The
increased yield from the commercial loan portfolio was the result of higher
yielding originations.
The increase in cost of funds is primarily the result of repricing of savings
deposits, a decrease in core deposits, and competition in the Bank's market area
for certificates of deposit.
Non-Interest Income
- -------------------
Loan fees and service charges increased $44,000, or 10% in the third quarter of
1997 as compared to third quarter 1996. The improvement was primarily increased
service charges due to the emphasis upon the Bank's core deposit base. Core
deposits, such as checking and savings accounts tend to generate more fee income
than time deposits.
Income from real estate development decreased to $272,000 for the three months
ended September 30, 1997 from $388,000 during 1996. The 1997 income is due
primarily to the sale of commercial lots from one development partnership in
which the company is a partner. The remaining development partnership contains
both single-family and commercial lots.
Net gains from the sale of mortgage loans and mortgage-backed and investment
securities declined to $139,000 for the third quarter of 1997 from $181,000
during the third quarter of 1996. There were fewer loans originated and sold
during 1997. This was due in large part to a general slowing of real estate
sales in the Bank's primary market area. The Bank has recently initiated plans,
both through the addition of personnel and expansion of residential loan
products offered, to increase mortgage originations and sales. Mortgage loans
originated for sale increased $1.5 million, or 20%, during the third quarter
compared to second quarter.
<PAGE>
Provisions for Loan Losses
- --------------------------
A provision of $80,000 was recorded for loan losses during the three months
ended September 30, 1997 as compared to $175,000 during the three months ended
September 30, 1996. The reduction is based upon management's regular analysis of
the adequacy of the loan loss allowance. This analysis considers current
impaired loans, overall delinquencies, loss histories and general economic
information.
Non-Interest Expenses
- ---------------------
Operating expenses excluding the one-time SAIF assessment increased by
approximately 2% during third quarter 1997 from third quarter 1996. Deposit
premiums paid to the Federal Deposit Insurance Corporation declined $103,000
during the third quarter of 1997 from the third quarter of 1996 as a result of
the recapitalization of the SAIF Fund. This reduction was offset by increases in
compensation and benefits, which increased due to general compensation increases
and additional personnel in the lending area.
NINE MONTHS ENDED SEPTEMBER 30, 1997 VS 1996:
The Company generated $1.3 million in net income during the nine months ended
September 30, 1997, representing an approximate 6% increase from the 1996 nine
month income excluding the net impact of the SAIF assessment. The more
significant improvements between periods were noted in income from real estate
development and net interest income. These improvements were partially offset by
a provision for losses on real estate owned of $505,000 and a reduction in gains
from the sale of mortgage loans, investments, and mortgage-backed securities of
$145,000.
Net Interest Income
- -------------------
Net interest income totaled $7.3 million for the first nine months of 1997, an
increase of 3% from $7.1 million in the prior year. The Company's net interest
margin increased to 3.18% from 3.00%. The asset yield increased to 7.95% from
7.72% while the Company's cost of funds remained virtually unchanged, increasing
to 4.86% from 4.83%. The increased asset yield resulted from consumer loan
portfolio growth and increased yields in the mortgage and mortgage-backed
securities portfolios. The increased yield from the mortgage-backed securities
portfolio was the result of repricing adjustable rate securities and a general
slowing of repayment activity earlier in the year. Repayments increased during
the third quarter of 1997 and management anticipates these repayments to
negatively impact mortgage-backed securities yields during the fourth quarter of
1997. No mortgage-backed securities were purchased during 1997 or 1996.
The increase in cost of funds is primarily the result of repricing of savings
deposits.
<PAGE>
Non-Interest Income
- -------------------
Income from real estate development increased to $1.0 million for the nine
months ended September 30, 1997 from $375,000 during 1996. The 1997 income is
due primarily to the sale of two commercial lots from one of the Company's
development partnerships and the sale of the Company's interest in two
development partnerships, each of which contained a single commercial lot.
Loan fees and service charges increased $164,000, or 13% during 1997 as compared
to 1996. The improvement was primarily due to increased service charges related
primarily to the Bank's core deposit accounts.
Net gains from the sale of mortgage loans and mortgage-backed and investment
securities declined to $294,000 in the first nine months of 1997 as compared to
$729,000 during the first nine months of 1996. The reduction in gains was the
result of lower sales volume of residential mortgage loans.
Provisions for Loan and REO Losses
- ----------------------------------
A provision of $505,000 was recorded during the first nine months of 1997 for
possible future losses related to foreclosed real estate. The provision relates
to the two largest properties in foreclosed property, one of which was sold
during the third quarter of 1997.
A loan loss provision of $220,000 was recorded during the first nine months of
1997. This compares to a provision of $395,000 recorded during the same period
of 1996. The reduction is the result of management's ongoing analysis of the
adequacy of the Bank's loan loss allowance.
Non-Interest Expenses
- ---------------------
The 1996 expenses contained a one-time charge of $2.0 million to recapitalize
the SAIF Fund.
Operating expenses remained relatively stable, increasing by $152,000 or 2% in
the first nine months of 1997 compared to the first nine months of 1996. Deposit
premiums paid to the Federal Deposit Insurance Corporation declined $295,000 or
47% during the first nine months of 1997 from the first nine months of 1996 as a
result of the recapitalization of the Savings Insurance Fund in late 1996. This
reduction was offset by increases in compensation and benefits, which increased
$339,000 between the first nine months of 1997 and 1996 due to general
compensation increases and additional personnel in the lending area. Other
expense increased $102,000 primarily due to legal costs incurred in the Bank's
lawsuit involving the parcel of foreclosed real estate in Michigan.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is generally regarded as the ability to generate sufficient cash flow
to meet all present and future funding commitments. The Bank's primary sources
of funds, or liquidity, are deposits, amortization and prepayment of loan
principal (including mortgage-backed and certain investment securities)
operations and to a lesser extent, maturities of investment securities and the
sale of available for sale securities.
The Bank's liquidity, represented by cash and cash equivalents, is a product of
its operating activities, investing activities, and financing activities.
Operating activities, consisting of net income adjusted for non cash activity,
generated or provided $1.4 million in cash during first nine months of 1997.
This compares to cash to $4.4 million provided during first nine months of 1996.
The primary difference between periods is the change in the held for sale
portfolio. The portfolio increased, requiring $317,000 in cash during 1997 while
it decreased or provided cash of $3.1 million during 1996.
Investing activities provided $5.7 million in cash during 1997 and used $8.3
million in 1996. Loan originations for the portfolio net of principal repayments
used $1.4 million during the first nine months of 1997 and $4.2 million during
1996. Loan originations decreased slightly in 1997 from the prior year while
repayments increased. Given the general level of interest rates at September 30,
1997, management anticipates the repayments may continue above prior year levels
through the remainder of 1997.
A total of $2.5 million in available for sale securities were sold during 1997.
There were no such sales during 1996. The 1997 sales consisted primarily of a
$2.0 million U. S. Treasury that was within 30 days of maturity.
A total of $4.4 million was received through the sale of real estate owned. The
total consists primarily of the sale of a parcel of land in Michigan for $3.7
million.
A total of $2.5 million was received from a real estate partnership in which the
Company is a general partner. The amount represents a distribution of
accumulated earnings of the partnership.
Financing activities used $9.4 million in cash during 1997, primarily due to a
$12.6 million decline in deposits. Financing activities for the first nine
months of 1996 provided $425,000 in cash, largely due to $8.3 million in
increased borrowings. Management believes the certificate of deposit pricing of
the Bank is reasonable and competitive. The Bank did not attempt to match the
higher rates offered on intermediate and longer term certificates of deposits
available in the marketplace and did experience a decline in these certificate
of deposit classes. Deposit pricing is reviewed continually in light of market
movements and the Bank's demand for funding sources.
The Bank had $2.4 million in short term borrowings at September 30, 1997.
Management utilizes short term borrowings, such as overnight federal funds line
and Federal Home Loan Bank open advance line for short term financing needs.
<PAGE>
There have been no material changes in the Company's interest rate position
since December 31, 1996. Other types of market risk, such as foreign currency
exchange risk and commodity price risk do not arise in the normal course of the
Company's business.
<PAGE>
HOMECORP, INC.
AND SUBSIDIARY
PART II. OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Index to Exhibits
(11) Statement regarding computation of earnings per share
(included in Note 4)
(27) Financial Data Schedule (attached)
(b) Reports on Form 8-K
HomeCorp filed the following form 8-K during the quarter
ended September 30, 1997.
July 23, 1997 - The registrant issued a release announcing
the results of operations for the second quarter of 1997 and
financial position as of June 30, 1997.
<PAGE>
HOMECORP, INC.
AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements 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.
HOMECORP, INC.
--------------
(Registrant)
Date: November 12, 1997 /s/ C. Steven Sjogren
------------------------ ------------------------
C. Steven Sjogren
President
Chief Executive Officer
Date: November 12, 1997 /s/ John R. Perkins
------------------------ -------------------------
John R. Perkins
Executive Vice President
Chief Financial Officer
Date: November 12, 1997 /s/ Dirk J. Meminger
------------------------ -------------------------
Dirk J. Meminger
Treasurer
Chief Accounting Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 11,648
<INT-BEARING-DEPOSITS> 178
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,729
<INVESTMENTS-CARRYING> 21,843
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<LOANS> 264,107
<ALLOWANCE> 1,618
<TOTAL-ASSETS> 326,877
<DEPOSITS> 299,148
<SHORT-TERM> 2,400
<LIABILITIES-OTHER> 3,007
<LONG-TERM> 0
<COMMON> 17
0
0
<OTHER-SE> 22,306
<TOTAL-LIABILITIES-AND-EQUITY> 326,877
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<INTEREST-OTHER> 297
<INTEREST-TOTAL> 18,145
<INTEREST-DEPOSIT> 10,878
<INTEREST-EXPENSE> 10,893
<INTEREST-INCOME-NET> 7,252
<LOAN-LOSSES> 220
<SECURITIES-GAINS> (9)
<EXPENSE-OTHER> 8,094
<INCOME-PRETAX> 2,172
<INCOME-PRE-EXTRAORDINARY> 1,342
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,342
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.74
<YIELD-ACTUAL> 3.18
<LOANS-NON> 1,791
<LOANS-PAST> 0
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<ALLOWANCE-OPEN> 1,582
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<ALLOWANCE-FOREIGN> 0
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