SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[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
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: O-18847
HOME FEDERAL BANCORP
--------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1807839
------- ----------------
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Origination) Identification No.)
222 West Second Street, Seymour, Indiana 47274-0648
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (812) 522-1592
--------------
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 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_____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of November 9, 1998:
Common Stock, no par value - 5,146,788 shares outstanding
<PAGE>
HOME FEDERAL BANCORP
FORM 10-Q
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
(unaudited) .................................................. 3
Consolidated Statements of Income
(unaudited) .................................................. 4
Consolidated Statements of Cash Flows
(unaudited) .................................................. 5
Forward looking statements ...................................... 6
Notes to Consolidated Financial
Statements ................................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................................. 8
PART II. OTHER INFORMATION
Item 3. Quantitative and Qualitative Analysis of Financial
Condition and Results of Operations .......................... 14
Item 6. Exhibits and Reports on Form 8-K ........................... 14
Signatures .......................................................... 15
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<PAGE>
HOME FEDERAL BANCORP
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited) September 30, June 30,
1998 1998
-------- --------
ASSETS:
Cash ................................................. $ 18,582 $ 19,063
Interest-bearing deposits ............................ 3,588 5,304
-------- --------
Total cash and cash equivalents .................... 22,170 24,367
-------- --------
Securities available for sale at fair value
(amortized cost $55,828 and $57,205) ................ 56,579 57,335
Securities held to maturity (fair value
$8,336 and $9,550) .................................. 8,278 9,565
Loans held for sale (fair value $12,764
and $12,840) ........................................ 12,618 12,711
Loans receivable, net of allowance for
loan losses of $4,325 and $4,243 .................... 587,769 582,040
Investments in joint ventures ........................ 5,001 4,077
Federal Home Loan Bank stock ......................... 5,456 5,456
Accrued interest receivable, net ..................... 4,814 4,721
Premises and equipment, net .......................... 8,491 8,566
Real estate owned .................................... 746 242
Prepaid expenses and other assets .................... 3,141 2,964
Cash surrender value of life insurance ............... 5,879 5,808
Goodwill ............................................. 1,672 1,697
-------- --------
TOTAL ASSETS ...................................... $722,614 $719,549
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits ............................................. $543,613 $543,989
Advances from Federal Home Loan Bank ................. 98,220 98,070
Other borrowings ..................................... 4,491 4,396
Advance payments by borrowers for
taxes and insurance ................................. 661 320
Accrued expenses and other liabilities ............... 6,170 5,822
-------- --------
Total liabilities ................................. 653,155 652,597
-------- --------
Shareholders' equity:
No par preferred stock;
Authorized: 2,000,000 shares
Issued and outstanding: None
No par common stock;
Authorized: 7,500,000 shares
Issued and outstanding: ............................ 8,006 7,963
5,142,288 shares at September 30, 1998
5,139,176 shares at June 30, 1998
Retained earnings, restricted ....................... 61,003 58,911
Accumulated other comprehensive income,
net of taxes ........................................ 450 78
-------- --------
Total shareholders' equity ........................ 69,459 66,952
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........ $722,614 $719,549
======== ========
See notes to consolidated financial statements
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<PAGE>
HOME FEDERAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(unaudited) Three Months Ended
September 30,
---------------------------
Interest income: 1998 1997
----------- -----------
Loans receivable ............................. $ 12,648 $ 12,834
Securities available for sale and
held to maturity ............................ 985 851
Other interest income ........................ 128 54
----------- -----------
Total interest income ......................... 13,761 13,739
----------- -----------
Interest expense:
Deposits ..................................... 6,274 6,184
Advances and borrowings ...................... 1,513 1,481
----------- -----------
Total interest expense ........................ 7,787 7,665
----------- -----------
Net interest income ........................... 5,974 6,074
Provision for loan losses ..................... 244 293
----------- -----------
Net interest income after provision
for loan losses ............................. 5,730 5,781
----------- -----------
Other income:
Gain on sale of loans ........................ 744 371
Gain(loss) on sale of securities ............. 2 (14)
Income from joint ventures ................... 89 40
Insurance, annuity income, other fees ........ 385 415
Service fees on NOW accounts ................. 511 446
Net gain (loss) on real estate owned
and repossessed assets ...................... 23 5
Loan servicing income ........................ 196 250
Miscellaneous ................................ 371 432
----------- -----------
Total other income ............................ 2,321 1,945
----------- -----------
Other expenses:
Compensation and employee benefits ........... 2,087 1,959
Occupancy and equipment ...................... 570 573
Service bureau expense ....................... 164 194
Federal insurance premium .................... 80 81
Marketing .................................... 106 176
Goodwill amortization ........................ 25 25
Miscellaneous ................................ 715 612
----------- -----------
Total other expenses .......................... 3,747 3,620
----------- -----------
Income before income taxes .................... 4,304 4,106
Income tax provision .......................... 1,699 1,645
----------- -----------
Net Income .................................... $ 2,605 $ 2,461
=========== ===========
Basic earnings per common share ............... $ 0.51 $ 0.47
Dilutive earnings per common share ............ $ 0.48 $ 0.46
Basic weighted average number of shares ....... 5,141,604 5,095,827
Dilutive weighted average number of shares .... 5,476,257 5,380,992
Dividends per share ........................... $ 0.100 $ 0.083
See notes to consolidated financial statements
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<PAGE>
HOME FEDERAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Three Months Ended
(unaudited) September 30,
--------------------
1998 1997
--------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 2,605 $ 2,461
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Accretion of discounts, amortization
and depreciation ................................. 304 249
Provision for loan losses ......................... 244 293
Net gain from sale of loans ....................... (744) (371)
Net (gain)/loss from sale of
investment securities ............................ (2) 14
Net gain from joint ventures;
real estate owned ................................ (97) (45)
Loan fees deferred (recognized), net .............. (9) (41)
Proceeds from sale of loans held for sale ......... 47,211 28,814
Origination of loans held for sale ................ (46,374) (29,330)
Increase (Decrease) in accrued interest
and other assets ................................. (6,702) 1,102
Increase in other liabilities ..................... 689 1,114
-------- --------
Net cash provided by (used in) operating activities .... (2,875) 4,260
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net principal disbursed on loans ....................... (523) (9,168)
Proceeds from:
Maturities/Repayments of:
Securities held to maturity .................... 2,142 613
Securities available for sale .................. 2,780 1,659
Sales of:
Securities available for sale .................. 7,144 4,326
Real estate owned and other asset sales ........ 157 99
Purchases of:
Loans ............................................. (661) (989)
Securities available for sale ..................... (8,599) (8,057)
Securities held to maturity ....................... (855) --
Federal Home Loan Bank stock ...................... -- (550)
Increase in cash surrender value of life insurance ..... (71) (69)
Acquisition of property and equipment, net ............. (234) (852)
-------- --------
Net cash provided by (used in) investing activities .... 1,280 (12,988)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net ................... (376) (2,439)
Proceeds from borrowings ............................... 20,650 32,900
Repayment of borrowings ................................ (20,500) (22,225)
Net proceeds from (net repayment of) overnight
borrowings ............................................ 95 (200)
Common stock options exercised ......................... 43 20
Payment of dividends on common stock ................... (514) (425)
-------- --------
Net cash provided by (used in) financing activities .... (602) 7,631
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS .............. (2,197) (1,097)
Cash and cash equivalents, beginning of period ......... 24,367 19,772
-------- --------
Cash and cash equivalents, end of period ............... $ 22,170 $ 18,675
======== ========
Supplemental information:
Cash paid for interest ................................. $ 7,815 $ 7,607
Cash paid for income taxes ............................. $ 875 $ 300
Assets acquired through foreclosure .................... % 486 $ 287
See notes to consolidated financial statements
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<PAGE>
Forward Looking Statements
This Quarterly Report on Form 10-Q ("Form 10-Q") contains statements
which constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-Q and include statements regarding the intent, belief,
outlook, estimate or expectations of the Company (as defined below), its
directors or its officers primarily with respect to future events and the future
financial performance of the Company. Readers of this Form 10-Q are cautioned
that any such forward looking statements are not guarantees of future events or
performance and involve risks and uncertainties, and that actual results may
differ materially from those in the forward looking statements as a result of
various factors. The accompanying information contained in this Form 10-Q
identifies important factors that could cause such differences. These factors
include changes in interest rates, loss of deposits and loan demand to other
savings and financial institutions, substantial changes in financial markets;
changes in real estate values and the real estate market; regulatory changes, or
unanticipated results in pending legal proceedings.
Notes to Consolidated Financial Statements
1. Basis of Presentation
The consolidated financial statements include the accounts of Home Federal
Bancorp (the "Company") and its wholly-owned subsidiary, Home Federal Savings
Bank (the "Bank"). These consolidated interim financial statements at September
30, 1998, and for the three month period ended September 30, 1998, have not been
examined by independent auditors, but reflect, in the opinion of the Company's
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position and results of operations for
such periods, including elimination of all significant intercompany balances and
transactions.
These statements should be read in conjunction with the consolidated financial
statements and related notes which are incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended June 30, 1998.
2. Reclassifications
Some items in the financial statements of previous periods have been
reclassified to conform to the current period presentation.
3. Earnings Per Share
The following is a reconciliation of the weighted average common shares for the
basic and diluted earnings per share computations:
Three months ended
September 30,
1998 1997
---- ----
Basic EPS:
Weighted average common shares ............... 5,141,604 5,095,827
========= =========
Diluted EPS:
Weighted average common shares ............... 5,141,604 5,095,827
Dilutive effect of stock options ............. 334,653 285,165
Weighted average common --------- ---------
and incremental shares ...................... 5,476,257 5,380,992
========= =========
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<PAGE>
4. New Accounting Pronouncements
The Corporation adopted FAS 130, "Comprehensive Income", effective July 1, 1998.
It requires that changes in the amounts of certain items, gains and losses on
certain securities be shown in the financial statements. FAS 130 does not
require a specific format for the financial statement in which comprehensive
income is reported, but does require that an amount representing total
comprehensive income be reported in that statement. All prior year financial
statements have been reclassified for comparative purposes.
The following is a summary of the Corporation's total comprehensive income for
the interim three month periods ended September 30, 1998 and 1997 under FAS 130:
---------------------
September 30,
1998 1997
---------------------
Net Income .......................................... $ 2,605 $ 2,461
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
arising during period ......................... 374 93
Reclassification adjustment for (gains)
losses included in net income ................. (2) 14
------- -------
Other comprehensive income .......................... 372 107
------- -------
Comprehensive Income ................................ $ 2,977 $ 2,568
======= =======
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures
about Segments of an Enterprise and Related Information," was issued in June
1997 and is effective for fiscal periods beginning after December 15, 1997. The
company will include the appropriate segment information beginning in the annual
financial statements for the year ending June 30, 1999 and all quarterly reports
thereafter. This statement will change the way public companies report
information about segments of their business in their annual financial
statements and requires them to report selected segment information in their
quarterly reports issued to shareholders. It also requires entity-wide
disclosures about the products and services an entity provides, the material
countries in which it holds assets and reports revenues, and its major
customers. Management has not yet quantified the effect of this new standard on
the consolidated financial statements.
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities," was issued in June 1998 and
is effective for all fiscal quarters of all fiscal years beginning after June
15, 1999. This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial condition and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated as a fair value
hedge, a cash flow hedge, or a hedge of foreign currency exposure. The
accounting for changes in the fair value of a derivative (that is, gains and
losses) depends on the intended use of the derivative and the resulting
designation. Management has not yet quantified the effect of this new standard
on the consolidated financial statements.
5. Subsequent Event
At the Annual Meeting of Shareholders held on October 27, 1998 amendments of
Articles 5 and 6 of the Corporation's Articles of Incorporation were adopted
increasing the number of authorized shares of Common Stock to 15,000,000 shares.
The total number of shares which the Corporation shall have authority to issue
is 17,000,000 shares, all of which are without par value. The remaining
2,000,000 shares which the company may issue are preferred shares.
-7-
<PAGE>
Part I, Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Home Federal Bancorp (the "Company") is organized as a unitary savings and loan
holding company and owns all the outstanding capital stock of Home Federal
Savings Bank (the "Bank"). The business of the Bank and therefore, the Company,
is to provide consumer and business banking services to certain markets in the
south-central portions of the State of Indiana. The Bank does business through
16 full service banking branches.
RESULTS OF OPERATIONS:
Quarter Ended September 30, 1998 Compared to Quarter Ended September 30, 1997
General
The Company reported net income of $2,605,000 for the quarter ended September
30, 1998, compared to $2,461,000 for the quarter ended September 30, 1997, an
increase of $144,000 or 5.9%. Basic earnings per common share for the current
quarter were $0.51 compared to $0.47 for the quarter ended September 30, 1997.
Dilutive earnings per common share increased $.02 to $.48 from $.46 for the
quarter ended September 30, 1998 compared to the quarter ended September 30,
1997.
Net Interest Income
Net interest income before provision for loan losses decreased by $100,000 for
the quarter ended September 30, 1998, compared to the quarter ended September
30, 1997. The decrease is primarily due to a decrease in the net interest margin
of 21 basis for the three month period ended September 30, 1998 as compared to
the three month period ended September 30, 1997. This decrease in net interest
margin is the result of rates dropping faster on interest earning assets than on
interest bearing liabilities due primarily to refinancing activity in the Bank's
loan products.
Net interest income after provision for loan losses decreased by $51,000 or .9%
for the quarter ended September 30, 1998, compared to the quarter ended
September 30, 1997. The provision for loan losses decreased $49,000 due to
slower growth in loans receivable net of $5.7 million over the three month
period ended September 30, 1998 as opposed to a $9.1 million increase in the
balance of loans receivable, net over the three month period ended September 30,
1997. At September 30, 1998, the loan loss allowance covered 84% of
non-performing loans, real estate owned and other repossessed assets. To the
best of management's knowledge, and in its opinion, classified assets do not
represent material credits which would cause management to have serious doubts
as to the ability of such borrowers to comply with their loan repayment terms.
Based on management's analysis of classified assets, loss histories and current
future projections, the allowance balance appears adequate at September 30,
1998.
Quarter ending September 30: (in thousands) 1998 1997
------------------------------------------- ---- ----
Allowance beginning balance ....................... $ 4,243 $ 3,649
Provision for loan losses ......................... 244 293
Charge-offs ....................................... (176) (202)
Recoveries ........................................ 14 20
- --------------------------------------------------- ------- -------
Loan Loss Allowance ............................... $ 4,325 $ 3,760
Allowance to Total Loans .......................... .71% .63%
Allowance to Nonperforming Assets ................. 84% 113%
Interest Income
Total interest income for the three-month period ended September 30, 1998,
remained relatively constant increasing $22,000, or .2%, over the same period of
the prior year. The small increase is due primarily to an increase in average
balances of loans receivable, net and investment securities for the quarter
ended September 30, 1998 as compared to the quarter ended September 30, 1997;
which was offset by a decrease in the yield on these interest earning assets.
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<PAGE>
Interest Expense
Total interest expense for the three-month period ended September 30, 1998
increased $122,000, or 1.6%, as compared to the same period a year ago. The
increase in interest expense for the three month period ended September 30,
1998, compared to the same period ended September 30, 1997, was due to increased
deposit and FHLB advances average balances for the same two comparative
quarters, which was also offset by declining rates paid on these interest
bearing liabilities.
Other Income
Total other income for the three-month period ended September 30, 1998,
increased $376,000 or 19.3% over the same period a year ago. This increase was
primarily due to the gain on sale of loans increasing $373,000 for the three
month period ended September 30, 1998, compared to the same period ended
September 30, 1997. The $373,000 gain on sale for the quarter ended September
30, 1998 reflects an increase in refinancing activity as the Bank sold, in the
secondary market, the majority of the fifteen and thirty year fixed rate loans
which the Bank originated.
Other Expenses
Total other expenses for the three-month period ended September 30, 1998,
increased $127,000 over the same period ended September 30, 1997. Compensation
and employee benefits increased $128,000. Increases in compensation were due to
normal salary increases and increased loan activity and related compensation
costs. Miscellaneous expenses increased $103,000 due to a variety of factors
including a $32,000 increase in loan expenses related to the refinancing surge,
a $33,000 increase in ATM expenses related to the increase in the number of ATM
machines as well as a variety of other small expense category increases.
FINANCIAL CONDITION:
Total assets increased by $3,065,000 from June 30, 1998, to September 30, 1998.
Net loans receivable increased by $5,729,000. Securities held to maturity
(including mortgage-backed securities) decreased $1,287,000, while cash and cash
equivalents decreased $2,197,000.
Total liabilities showed a small increase of $558,000 from June 30, 1998, to
September 30, 1998. Decreases of $376,000 in deposits were offset by increases
of $341,000 in advance payments by borrowers for taxes and insurance and an
increase of $348,000 in accrued expenses and other liabilities.
Shareholders' equity increased $2,507,000 during the same period. Retained
earnings increased $2,605,000 million from net income and decreased $514,000 for
dividends paid. Common stock increased $43,000 for stock options exercised
during the period. In accordance with Statement of Accounting Standards 115,
"Accounting for Certain Investments in Debt and Equity Securities", the Company
had unrealized gains in its available for sale portfolio of $450,000, or a
$372,000 increase in shareholders' equity from the June 30, 1998 gain position
of $78,000.
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<PAGE>
At September 30, 1998, the Bank exceeded all current OTS regulatory capital
requirements as follows:
<TABLE>
<CAPTION>
To Be Categorized
As "Well Capitalized"
Under Prompt
For Capital Corrective Action
(dollars in thousands) Actual Adequacy Purposes Provisions
------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of September 30, 1998
<S> <C> <C> <C> <C> <C> <C>
Tangible capital (to total assets). $59,728 8.35% $10,734 1.50% N/A N/A
Core capital (to total assets)..... $59,728 8.35% $28,623 4.00% N/A N/A
Total risk-based capital
(to risk-weighted assets)....... $63,463 11.72% $43,323 8.00% $54,153 10.00%
Tier 1 risk-based capital
(to risk-weighted assets)....... $59,728 11.03% N/A N/A $32,492 6.00%
Tier 1 leverage capital
(to average assets)............. $59,728 8.26% N/A N/A $36,137 5.00%
</TABLE>
Liquidity and Capital Resources
The minimum liquidity level is 4%, the lowest amount allowed by law. At
September 30, 1998, the Bank's average liquidity ratio was 16.0%. Historically,
the Bank has maintained its liquid assets which qualify for purposes of the OTS
liquidity regulations above the minimum requirements imposed by such regulations
and at a level believed adequate to meet requirements of normal daily
activities, repayment of maturing debt and potential deposit outflows. Cash flow
projections are regularly reviewed and updated to assure that adequate liquidity
is maintained. Cash for these purposes is generated through the sale or maturity
of investment securities and loan sales and repayments, and may be generated
through increases in deposits. Loan payments are a relatively stable source of
funds, while deposit flows are influenced significantly by the level of interest
rates and general money market conditions. Borrowings may be used to compensate
for reductions in other sources of funds such as deposits. As a member of the
FHLB system, the Bank may borrow from the FHLB of Indianapolis. At September 30,
1998, the Bank had $98.2 million in such borrowings. As of that date, the Bank
had commitments to fund loan originations and purchases of approximately $42.3
million and commitments to sell loans of $21.0 million. In the opinion of
management, the Bank has sufficient cash flow and borrowing capacity to meet
current and anticipated funding commitments.
Year 2000 Disclosure
The Problem
The Year 2000 issue is the result of potential problems with computer systems or
any equipment with computer chips that use dates where the year portion of the
date has been stored as just two digits (e.g. 98 for 1998). Systems using this
two-digit approach will not be able to determine whether "00" represents the
year 2000 or 1900. The problem, if not corrected, will make those systems fail
altogether or, even worse, allow them to generate incorrect calculations causing
a disruption of normal operations.
Readiness Efforts
In 1997, a comprehensive project plan to address the Year 2000 issue as it
relates to the Company's operation was developed, approved by the Board of
Directors and implemented. The scope of the plan includes five phases of
Awareness, Assessment, Renovation, Validation and Implementation as defined by
federal banking regulatory agencies. A project team that consists of key members
of the technology staff, representatives of functional business units and senior
management was developed. Additionally, the duties of the Vice President of Data
Processing Compliance were realigned to serve primarily as the Year 2000 project
manager.
-10-
<PAGE>
An assessment of the impact of the Year 2000 issue on the Company's computer
systems has been completed. The scope of the project also includes other
operational and environmental systems since they may be impacted if embedded
computer chips control the functionality of those systems. From the assessment,
the Company has identified and prioritized those systems deemed to be mission
critical or those that have a significant impact on normal operations.
The Company relies on third party vendors and service providers for its data
processing capabilities and to maintain its computer systems. Formal
communications with these providers and other external counterparties were
initiated in 1997 to assess the Year 2000 readiness of their products and
services. Their progress in meeting their targeted schedule is being monitored
for any indication that they may not be able to address the problem in time.
Thus far, responses indicate that most of the significant providers currently
have compliant versions available or are well into the renovation and testing
phases with completion scheduled for sometime in 1998. However, the Company can
give no guarantee that the systems of these service providers and vendors on
which the Company's systems rely will be timely renovated.
Additionally, the Company has implemented a plan to manage the potential risk
posed by the impact of the Year 2000 issue on its major customers. Formal
communications have been initiated, and an evaluation to assess the risk posed
by the Company's material customers is well underway. This evaluation of risk is
scheduled to be completed by December 31, 1998. The projected completion date of
the risk assessment is based upon management's best estimates and assumes the
continued availability of certain resources and timely response from the
customers.
Current Status
The project team estimates that the Company's Year 2000 readiness project is 82%
complete and that the activities involved in assessing external risks and
operational issues are 86% completed overall. These estimates and the
projections in the following table are derived from the Year 2000 Checklist
Version 2, a project-tracking tool provided by the Office of Thrift Supervision.
This table provides a summary of the current status of the five project phases
and a projected timetable for completion.
- ----------------- -------------- --------------- ------------------------------
Projected
Project Phase % Completed Completion Comments
- ----------------- -------------- --------------- ------------------------------
Awareness 100% Completed
Assessment 100% Completed
Renovation 100% Completed
Validation 78% March 31, 1999 Target for critical systems
Implementation 59% June 30, 1999 Target for critical systems
- ----------------- -------------- --------------- ------------------------------
Overall 82% (As of November 1, 1998)
- ----------------- -------------- --------------- ------------------------------
Costs
The Company has thus far primarily used and expects to continue to primarily use
internal resources to implement its readiness plan and to upgrade or replace and
test systems affected by the Year 2000 issue. The total cost to the Company of
these Year 2000 compliance activities has not been and is not anticipated to be
material to its financial position or results of operations in any given year.
In total, the Company estimates that its costs, excluding personnel expenses,
for Year 2000 remediation and testing of its computer systems will amount to
less than $50,000 over the three-year period from 1997 through 1999. Not
included in this estimate is the cost to replace fully depreciated systems
during this period, which occurs in the normal course of business and is not
directly attributable to the Year 2000 issue.
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<PAGE>
Risk Assessment
Based upon current information related to the progress of its major vendors and
service providers, management has determined that the Year 2000 issue will not
pose significant operational problems for its computer systems. This
determination is based on the ability of those vendors and service providers to
renovate, in a timely manner, the products and services on which the Company's
systems rely. However, the Company can give no guarantee that the systems of
these suppliers will be timely renovated.
Contingency Plan
Realizing that some disruption may occur despite its best efforts, the Company
is in the process of developing contingency plans for each critical system in
the event that one or more of those systems fail. Critical business functions
have been identified and the development of temporary procedures for the
continued operations of those functions has begun. Updating and testing these
business resumption procedures is an ongoing process which will continue
throughout 1999.
The costs and the timetable in which the Company plans to complete the Year 2000
readiness activities are based on management's best estimates, which were
derived using numerous assumptions of future events including the continued
availability of certain resources, third party readiness plans and other
factors. The Company can make no guarantee that these estimates will be achieved
and actual results could differ from such plans.
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<PAGE>
Supplemental Data: Three Months Ended
September 30,
------------------
1998 1997
---- ----
Weighted average interest rate earned
on total interest-earning assets ........... 8.13% 8.47%
Weighted average cost of total
interest-bearing liabilities ............... 4.80% 4.90%
Interest rate spread during period ............. 3.33% 3.57%
Net yield on interest-earning assets
(net interest income divided by average
interest-earning assets on annualized basis) 3.53% 3.74%
Total interest income divided by average
total assets (on annualized basis) ......... 7.62% 7.96%
Total interest expense divided by
average total assets (on annualized basis) . 4.27% 4.40%
Net interest income divided by average
total assets (on annualized basis) ......... 3.31% 3.52%
Return on assets (net income divided by
average total assets on annualized basis) .. 1.44% 1.42%
Return on equity (net income divided by
average total equity on annualized basis) .. 15.31% 16.70%
Net interest margin to average
earning Assets ............................ 3.53% 3.74%
Net interest margin to average assets .......... 3.31% 3.52%
At September 30,
-----------------
1998 1997
---- ----
Book value per share outstanding ............... $13.51 $11.78
Interest rate spread ........................... 3.50% 3.56%
Nonperforming Assets:
Loans: Non-accrual .................... $4,432 $2,899
Past due 90 days or more ....... -- 2
Restructured ................... -- 1
------ ------
Total nonperforming loans ................. 4,432 2,902
Real estate owned, net .................... 602 302
Other repossessed assets, net ............. 144 136
------ ------
Total Nonperforming Assets ................ $5,178 $3,340
====== ======
Nonperforming assets divided by total assets.... 0.72% 0.48%
Nonperforming loans divided by total loans ..... 0.73% 0.49%
Balance in Provision for Loan Losses ........... $4,325 $3,760
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 3. Quantitative and Qualitative Analysis of Financial Condition
and Results of Operations.
In the opinion of management the results for the quarter ended September 30,
1998 will not be materially different from the results presented on page 13 of
the annual report for fiscal year 1998.
Item 4. Submission of Matters to a Vote of Security Holders.
N/A
Item 5. Other information
N/A
Item 6. Exhibits and Reports on Form 8-K
(a) N/A
(b) Reports on Form 8-K.
On September 23, 1998 the registrant filed a Form 8-K regarding
a press release issued by Home Federal Bancorp concerning
the approval by the Board of Directors to pursue a stock buy
back of up to 5% of its stock traded on NASDAQ under the
symbol HOMF.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on behalf of
the undersigned thereto duly authorized.
Home Federal Bancorp
DATE: November 9, 1998 /S/ Lawrence E. Welker
------------------- -----------------------
Lawrence E. Welker,
Executive Vice President,
Treasurer, and Chief Financial Officer
-15-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial
information extracted from the registrant's
unaudited consolidated finanacial statements
for the three months ended September 30, 1998
and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000867493
<NAME> Home Federal Bancorp
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 18,582
<INT-BEARING-DEPOSITS> 3,588
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 56,579
<INVESTMENTS-CARRYING> 8,278
<INVESTMENTS-MARKET> 8,336
<LOANS> 587,769
<ALLOWANCE> 4,325
<TOTAL-ASSETS> 722,614
<DEPOSITS> 543,613
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,170
<LONG-TERM> 0
0
0
<COMMON> 8,006
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<INTEREST-TOTAL> 13,761
<INTEREST-DEPOSIT> 6,274
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<EXPENSE-OTHER> 715
<INCOME-PRETAX> 4,304
<INCOME-PRE-EXTRAORDINARY> 4,304
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,605
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.48
<YIELD-ACTUAL> 0
<LOANS-NON> 4,432
<LOANS-PAST> 0
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<ALLOWANCE-OPEN> 4,243
<CHARGE-OFFS> 176
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<ALLOWANCE-CLOSE> 4,325
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</TABLE>
