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 March 31, 2000
[ ] 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 May 10, 2000.
Common Stock, no par value - 4,732,085 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 ...................... 13
Item 4. Submission of Matters to a Vote of Security Holders ............ 13
Item 5. Other Information .............................................. 13
Item 6. Exhibits and Reports on Form 8-K ............................... 13
Signatures .............................................................. 14
- 2 -
<PAGE>
HOME FEDERAL BANCORP
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
--------- ---------
ASSETS:
<S> <C> <C>
Cash .................................................................. $ 20,556 $ 21,377
Interest-bearing deposits ............................................. 4,300 11,529
--------- ---------
Total cash and cash equivalents ..................................... 24,856 32,906
--------- ---------
Securities available for sale at fair value (amortized cost $101,918
and $74,482) ..................................................... 100,141 73,521
Securities held to maturity (fair value $6,782 and $4,960) ............ 6,933 4,987
Loans held for sale (fair value $1,560 and $5,136) .................... 1,548 5,102
Loans receivable, net of allowance for loan losses of $4,735 and $4,349 627,616 586,918
Investments in joint ventures ......................................... 10,433 7,090
Federal Home Loan Bank stock .......................................... 7,657 5,814
Accrued interest receivable, net ...................................... 5,195 4,897
Premises and equipment, net ........................................... 9,230 9,129
Real estate owned ..................................................... 1,488 2,050
Prepaid expenses and other assets ..................................... 4,491 4,404
Cash surrender value of life insurance ................................ 6,315 6,095
Goodwill .............................................................. 1,520 1,596
--------- ---------
TOTAL ASSETS ....................................................... $ 807,423 $ 744,509
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits .............................................................. $ 577,149 $ 579,882
Advances from Federal Home Loan Bank .................................. 146,991 87,895
Senior debt ........................................................... 6,845 1,000
Other borrowings ...................................................... 2,205 1,515
Advance payments by borrowers for taxes and insurance ................. 766 270
Accrued expenses and other liabilities ................................ 5,858 4,312
--------- ---------
Total liabilities .................................................. 739,814 674,874
--------- ---------
Shareholders' equity:
No par preferred stock; Authorized: 2,000,000 shares
Issued and outstanding: None
No par common stock; Authorized: 15,000,000 shares
Issued and outstanding: ............................................. 8,269 8,512
4,729,046 shares at March 31, 2000
4,984,814 shares at June 30, 1999
Retained earnings, restricted ........................................ 60,406 61,699
Accumulated other comprehensive income (loss), net of taxes ........... (1,066) (576)
--------- ---------
Total shareholders' equity ......................................... 67,609 69,635
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ......................... $ 807,423 $ 744,509
========= =========
</TABLE>
See notes to unaudited consolidated financial statements
- 3 -
<PAGE>
HOME FEDERAL BANCORP
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------- ------------------
Interest income: 2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Loans receivable .......................................... $12,922 $12,120 $37,409 $37,444
Securities available for sale and held to maturity ........ 1,712 978 4,546 2,894
Other interest income ..................................... 131 201 385 416
------- ------- ------- -------
Total interest income ...................................... 14,765 13,299 42,340 40,754
------- ------- ------- -------
Interest expense:
Deposits .................................................. 5,991 5,840 17,699 18,150
Advances and borrowings ................................... 2,282 1,560 5,602 4,699
------- ------- ------- -------
Total interest expense ..................................... 8,273 7,400 23,301 22,849
------- ------- ------- -------
Net interest income ........................................ 6,492 5,899 19,039 17,905
Provision for loan losses .................................. 404 301 1,037 775
------- ------- ------- -------
Net interest income after provision for loan losses ........ 6,088 5,598 18,002 17,130
------- ------- ------- -------
Other income:
Gain on sale of loans ..................................... 106 1,012 555 2,836
Gain on sale of securities ................................ (118) -- (116) 2
Income from joint ventures ................................ 184 98 491 267
Insurance, annuity income, other fees ..................... 327 270 848 974
Service fees on NOW accounts .............................. 510 490 1,619 1,522
Net gain (loss) on real estate owned and repossessed assets 66 (13) 92 2
Loan servicing income ..................................... 293 367 821 782
Miscellaneous ............................................. 416 409 1,205 1,398
------- ------- ------- -------
Total other income ......................................... 1,784 2,633 5,515 7,783
------- ------- ------- -------
Other expenses:
Compensation and employee benefits ........................ 2,256 2,204 6,537 6,382
Occupancy and equipment ................................... 620 596 1,870 1,747
Service bureau expense .................................... 225 225 637 587
Federal insurance premium ................................. 30 82 195 240
Marketing ................................................. 114 130 321 388
Goodwill amortization ..................................... 26 25 76 75
Miscellaneous ............................................. 789 751 2,499 2,625
------- ------- ------- -------
Total other expenses ....................................... 4,060 4,013 12,135 12,044
------- ------- ------- -------
Income before income taxes ................................. 3,812 4,218 11,382 12,869
Income tax provision ....................................... 1,389 1,663 4,439 5,074
------- ------- ------- -------
Net Income ................................................. $ 2,423 $ 2,555 $ 6,943 $ 7,795
======= ======= ======= =======
Basic earnings per common share............................. $ 0.51 $ 0.50 $ 1.44 $ 1.53
Dilutive earnings per common share.......................... $ 0.49 $ 0.48 $ 1.37 $ 1.44
Basic weighted average number of shares..................... 4,721,663 5,061,561 4,824,995 5,107,682
Dilutive weighted average number of shares.................. 4,935,997 5,331,228 5,071,626 5,410,631
Dividends per share......................................... $0.138 $0.110 $0.400 $0.320
</TABLE>
See notes to consolidated financial statements
- 4 -
<PAGE>
HOME FEDERAL BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------
2000 1999
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income ................................................... $ 6,943 $ 7,795
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Accretion of discounts, amortization and depreciation ... 1,486 523
Provision for loan losses ............................... 1,037 775
Net gain from sale of loans ............................. (555) (2,836)
Net (gain)/loss from sale of investment securities ...... 116 (2)
Net gain from joint ventures; real estate owned ......... (582) (269)
Loan fees deferred (recognized), net .................... 65 (89)
Proceeds from sale of loans held for sale ............... 36,811 191,965
Origination of loans held for sale ...................... (32,702) (182,732)
Increase (decrease) in accrued interest and other assets (4,983) (3,162)
Increase (decrease) in other liabilities ................ 2,042 (1,335)
--------- ---------
Net cash provided by (used in) operating activities .......... 9,678 10,633
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net principal disbursed on loans ............................. (39,287) (1,362)
Proceeds from:
Maturities/Repayments of:
Securities held to maturity .......................... 876 4,560
Securities available for sale ........................ 1,873 6,822
Sales of:
Securities available for sale ........................ 17,573 17,144
Real estate owned and other asset sales .............. 2,618 792
Purchases of:
Loans ................................................... (2,513) (5,170)
Securities available for sale ........................... (47,048) (34,511)
Securities held to maturity ............................. (3,017) (855)
Federal Home Loan Bank stock ............................ (1,843) (358)
Increase in cash surrender value of life insurance ........... (220) (215)
Acquisition of property and equipment, net ................... (1,159) (829)
--------- ---------
Net cash provided by (used in) investing activities .......... (72,147) (13,982)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits, net ......................... (2,733) 20,727
Proceeds from borrowings ..................................... 86,345 52,290
Repayment of borrowings ...................................... (21,404) (53,181)
Net proceeds from (net repayment of) overnight borrowings .... 690 (1,465)
Common stock options exercised ............................... 173 695
Repurchase of common stock ................................... (6,744) (4,042)
Payment of dividends on common stock ......................... (1,908) (1,627)
--------- ---------
Net cash provided by (used in) financing activities .......... 54,419 13,397
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS .................... (8,050) 10,048
Cash and cash equivalents, beginning of period ............... 32,906 24,367
--------- ---------
Cash and cash equivalents, end of period ..................... $ 24,856 $ 34,415
========= =========
Supplemental information:
Cash paid for interest ....................................... $ 23,069 $ 22,933
Cash paid for income taxes ................................... $ 3,769 $ 5,175
Assets acquired through foreclosure .......................... $ 1,698 $ 1,442
</TABLE>
See notes to unaudited consolidated financial statements
- 5 -
<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 March 31,
2000, and for the three and nine month period ended March 31, 2000, 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, 1999.
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:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------- -----------------
2000 1999 2000 1999
---- ---- ---- ----
Basic EPS:
<S> <C> <C> <C> <C>
Weighted average common shares . 4,721,663 5,061,561 4,824,995 5,107,682
========= ========= ========= =========
Diluted EPS:
Weighted average common shares . 4,721,663 5,061,561 4,824,995 5,107,682
Dilutive effect of stock options 214,334 269,667 246,631 302,949
--------- --------- --------- ---------
Weighted average common and
incremental shares ............... 4,935,997 5,331,228 5,071,626 5,410,631
========= ========= ========= =========
</TABLE>
- 6 -
<PAGE>
4. Comprehensive Income
- -----------------------
The Corporation adopted FAS 130, "Comprehensive Income", effective July 1, 1998.
It requires that changes in the amounts of certain items and 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 and nine month period ended March 31, 2000 and 1999
under FAS 130:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------ ------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income .................................................. $ 2,423 $ 2,555 $ 6,943 $ 7,795
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period (383) (272) (606) (201)
Reclassification adjustment for (gains) losses
included in net income ............................ 118 -- 116 (2)
------- ------- ------- -------
Other comprehensive income .................................. (265) (272) (490) (203)
------- ------- ------- -------
Comprehensive Income ........................................ $ 2,158 $ 2,283 $ 6,453 $ 7,592
======= ======= ======= =======
</TABLE>
5. Segments
- -----------
Effective July 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and
Related Information". SFAS 131 redefines how operating segments are determined
and requires disclosure of certain financial and descriptive information about a
company's operating segments. In accordance with SFAS 131, management has
concluded that the Company is comprised of a single operating segment, community
banking activities, and has disclosed all required information relating to its
one operating segment. Management considers parent company activity to represent
an overhead function rather than an operating segment. The Company does not have
a single external customer from which it derives 10 percent or more of its
revenue and operates in one geographical area.
6. New Accounting Pronouncements
- --------------------------------
The Financial Accounting Standards Board has issued Statement No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of SFAS 133", which amends FAS No. 133,"Accounting for Derivative
Instruments and Hedging Activities", that the Company will be required to adopt
in future periods. SFAS 133, as amended by SFAS 137, is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. 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.
- 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 March 31, 2000 Compared to Quarter Ended March 31, 1999
- ---------------------------------------------------------------------
General
- -------
The Company reported net income of $2,423,000 for the quarter ended March 31,
2000, compared to $2,555,000 for the quarter ended March 31, 1999, a decrease of
$132,000 or 5.2%. Basic earnings per common share for the current quarter were
$0.51 compared to $0.50 for the quarter ended March 31, 1999. Dilutive earnings
per common share were $0.49 compared to $0.48 for the quarter ended March 31,
1999.
Net Interest Income
- -------------------
Net interest income before provision for loan losses increased by $593,000 for
the quarter ended March 31, 2000, compared to the quarter ended March 31, 1999.
The increase is primarily due to an increase in the interest rate spread of 24
basis points for the three month period ended March 31, 2000 as compared to the
three month period ended March 31, 1999. This increase in interest rate spread
is the result of rates rising faster on interest earning assets, which were up
31 basis points, than on interest bearing liabilities, which increased only 7
basis points.
The provision for loan losses increased $103,000 for the quarter ended March 31,
2000 compared to the quarter ended March 31, 1999, reflecting the growth in the
loan portfolio. At March 31, 2000, the loan loss allowance covered 100.5% 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 economic
conditions, the allowance balance appears adequate at March 31, 2000.
Quarter ending March 31: (in thousands) 2000 1999
--------------------------------------- ---- ----
Allowance beginning balance................ $4,478 $4,413
Provision for loan losses.................. 404 301
Charge-offs................................ (168) (274)
Recoveries................................. 21 30
------ ------
Loan Loss Allowance........................ $4,735 $4,470
====== ======
Allowance to Total Loans................... .75% .75%
Allowance to Nonperforming Assets.......... 100% 59%
Interest Income
- ---------------
Total interest income for the three-month period ended March 31, 2000, increased
$1,466,000, or 11.0%, over the same period of the prior year. The average
balance of interest earning assets increased $45,945,000. Another factor
effecting the increase in interest income was a 31 basis point increase in the
weighted average interest rate earned on interest bearing assets to 8.0% for the
quarter ended March 31, 2000 from 7.7% for the quarter ended March 31, 1999.
Interest Expense
- ----------------
Total interest expense for the three-month period ended March 31, 2000 increased
$873,000, or 11.8%, as compared to the same period a year ago. The increase in
interest expense for the three month period ended March 31, 2000, compared to
the same period ended March 31, 1999, was the net result of an increase of
$59,951,000 in the average balances of interest bearing liabilities, being
augmented by a 7 basis point increase in the rates paid on interest bearing
liabilities.
- 8 -
<PAGE>
Other Income
- ------------
Total other income for the three-month period ended March 31, 2000, decreased
$849,000 or 32.2% over the same period a year ago. This decrease was due
primarily to a decrease of $906,000 in the gain on sale of loans. Loan sales in
the secondary market fell $58,232,000 or 93.2% to $4,273,000 in the quarter
ended March 31, 2000 from sales of $62,505,000 in the same quarter last year.
The decline in loan sales is attributable to the rise in interest rates, which
has in turn reduced the Bank's fixed rate loan originations. The Bank currently
only sales fixed rate loans in the secondary market. Therefore as the Bank's
fixed rate loan originations decline, so does the income from the sale of these
loans in the secondary market decline.
An additional factor, which reduced other income, was an $118,000 loss on the
sale of securities in the quarter ended March 31, 2000 as compared to the
quarter ended March 31, 1999. This loss on security sales resulted from the
partial restructuring of the investment portfolio to obtain a higher yield. The
loss will be recouped, within one year, from higher yielding securities, which
were purchased with the proceeds from the sale of lower yielding securities.
Other Expenses
- --------------
Total other expenses for the three-month period ended March 31, 2000, remained
fairly stable increasing 1.2% or $47,000 over the same period ended March 31,
1999. All categories within the other expenses section showed only slight
increases or decreases for the comparative quarters ended March 31, 2000 and
March 31, 1999. The largest dollar increase was $52,000 in compensation and
employee benefits. This increase was the net result of several factors including
normal salary increases, increases in employee retirement plan expense and
decreases in other employee benefits. The largest dollar decrease was also
$52,000 reflecting the drop in the federal insurance premium on insured
deposits.
Nine months Ended March 31, 2000 Compared to Nine months Ended March 31, 1999:
- ------------------------------------------------------------------------------
General
- -------
The Company reported net income of $6,943,000, or $1.44 per basic and $1.37 per
dilutive common share, for the nine months ended March 31, 2000, compared to
$7,795,000, or $1.53 per basic and $1.44 per dilutive common share, for the same
period a year ago, a decrease of $852,000.
Net Interest Income
- -------------------
Net interest income before provision for loan losses increased $1,134,000 for
the nine month period ended March 31, 2000, compared to the same period ended
March 31, 1999. Factors affecting this increase was the changing mix of interest
bearing liabilities as the average balance in higher yielding certificates of
deposit declined and lower yielding money market funds increased, bringing the
average rate paid on interest bearing liabilities down 20 basis points.
Additionally, the rate earned on interest earning assets, was down 5 basis
points, as the growth in interest bearing assets occurred primarily in the home
equity product that was offered at a teaser rate. Net interest income after
provision for loan losses increased by $872,000 for the nine month period ended
March 31, 2000.
The change to the loan loss allowance for the nine month period ended March 31,
2000 is as follows:
Nine months ending March 31: (in thousands) 2000 1999
------------------------------------------- ---- ----
Allowance beginning balance................... $4,349 $4,243
Provision for loan losses..................... 1,037 775
Charge-offs................................... (718) (610)
Recoverie..................................... 67 62
------ ------
Loan Loss Allowance........................... $4,735 $4,470
Allowance to Total Loans...................... .75% .75%
Allowance to Nonperforming Assets............. 100% 59%
Interest Income
- ---------------
Total interest income for the nine month period ended March 31, 2000 increased
$1,586,000, or 3.9% compared to the nine month period ended March 31, 1999. The
increase in interest income was due to an increase in average balances of
$30,850,000 for the nine month period ended March 31, 2000 as compared to the
nine month period ended March 31, 1999. The increase in interest income was
mitigated by a decline of 5 basis points in the weighted average interest rate
earned on interest bearing assets.
- 9 -
<PAGE>
Interest Expense
- ----------------
Total interest expense for the nine months ended March 31, 2000 increased
$452,000, or 2.0% compared to the nine month period ended March 31, 1999. This
increase was due to increases in average balances of deposits and borrowings
outstanding of $41,885,000. The increase in interest expense was offset by 20
basis point decline in the weighted average cost of funds for the nine-month
period ended March 31, 2000 as compared to the same period ended March 31, 1999.
Other Income
- ------------
Total other income for the nine month period ended March 31, 2000 decreased
$2,268,000 as compared to the same period one year ago. The primary decrease in
other income is attributable to a $2,281,000 decrease in gain on sale of loans
reflective of the decreases detailed previously. The $118,000 loss on the sale
of investment securities that was also discussed in the third quarter decreases,
contributed to the decline in other income. Smaller additional decreases in
other income were a $126,000 decrease in insurance, annuity income and other
fees due to a $201,000 decrease in income from annuity and brokerage sales. This
decrease in brokerage fees reflects a change in the way the Bank is compensated
for brokerage sales which reduces initial fees received, but will generate
future income from the management of clients' accounts. Additionally a $193,000
decrease in miscellaneous income resulting from income received in the nine
month period ended March 31, 1999, from a nonrecurring lease buyout of $159,000
and a prior year tax refund of $59,000 also added to the reduction in other
income. A factor reducing the decline of other income include increases in joint
venture income of $224,000 for the nine month period ended March 31, 2000 as
compared to the same period ended March 31, 1999. This increase was attributable
to the Bank's newest joint venture partnerships progressing from the start up
phase to an income producing phase.
Other Expenses
- --------------
Total other expenses for the nine month period ended March 31, 2000 remained
relatively stable increasing less than one percent or $91,000. This small
increase is the result of the net effect of various factors, including the
previously mentioned increase in compensation and employee benefits discussed in
the three month period ended March 31, 2000. In addition to the increase in
compensation and employee benefits, an increase was recorded in occupancy and
equipment due primarily to increased depreciation associated with shorter lived
technology assets. These increases in other expenses were primarily offset by a
$126,000 decrease in miscellaneous expenses resulting from a $298,000 write off
of bad checks and a write down of $118,000 on the value of the building held by
the Company for investment reflecting the previously mentioned lease buy out,
and the expensing of $39,000 of deferred costs associated with the same
building, which occurred in the nine months ending March 31, 1999. These
decreases in miscellaneous expenses were offset by increases in miscellaneous
expenses occurring in the nine months ending March 31, 2000 attributable
primarily to consulting fees and real estate owned expenses.
FINANCIAL CONDITION:
Total assets showed an increase of $62,914,000 from June 30, 1999, to March 31,
2000. Securities available for sale increased $26,620,000 which were funded
primarily by Federal Home Loan Bank advances, which increased $59,096,000. The
increase in FHLB advances also funded the increase in loans receivable of
$40,698,000.
Shareholders' equity decreased $2,026,000 during the same period. Retained
earnings decreased $1,293,000 which was the result of increases from net income
of $6,943,000 and decreases of $1,908,000 for dividends paid and decreases of
$6,328,000 from the repurchase of the Company's common stock. Common stock
decreased $243,000 due to stock repurchases of $416,000, which was offset by
stock options exercised of $173,000 during the period. In accordance with
Statement of Accounting Standards 115, "Accounting for Certain Investments in
Debt and Equity Securities", the Company had an accumulated other comprehensive
loss, net of tax, from unrealized losses in its available for sale portfolio of
$1,066,000, or a $490,000 decrease in shareholders' equity from the June 30,
1999 loss position of $576,000.
- 10 -
<PAGE>
At March 31, 2000, 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 March 31, 2000
<S> <C> <C> <C> <C> <C> <C>
Tangible capital (to total assets) $62,567 7.86% $11,943 1.50% N/A N/A
Core capital (to total assets) $62,567 7.86% $31,849 4.00% N/A N/A
Total risk-based capital
(to risk-weighted assets) $66,785 11.05% $48,353 8.00% $60,441 10.00%
Tier 1 risk-based capital
(to risk-weighted assets) $62,567 10.35% N/A N/A $36,265 6.00%
Tier 1 leverage capital
(to average assets) $62,567 8.20% N/A N/A $38,160 5.00%
</TABLE>
Liquidity and Capital Resources
The minimum liquidity allowed by law is 4%. At March 31, 2000, the Bank's
average liquidity ratio was 20.1%. 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 March 31, 2000,
the Bank had $146,991,000 in such borrowings. As of that date, the Bank had
commitments to fund loan originations and purchases of approximately $19,026,000
and commitments to sell loans of $4,287,000. In the opinion of management, the
Bank has sufficient cash flow and borrowing capacity to meet current and
anticipated funding commitments.
YEAR 2000 READINESS DISCLOSURE
Transition from 1999 to 2000
Home Federal Bancorp entered the Year 2000 smoothly and unaffected by the date
change. Key employees at all offices worked during the rollover weekend to check
the functionality of all major systems and reported the test results to a
central command center. The technical project team monitored all testing and
immediately investigated all reported incidents or problems to determine if a
Year 2000 problem existed. No problems reported were directly related the Year
2000 date change - only typical computer problems that occur during the normal
course of business.
- 11 -
<PAGE>
<TABLE>
<CAPTION>
Supplemental Data: Three Months Ended Year to Date
March 31, March 31,
------------------ ------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Weighted average interest rate earned
on total interest-earning assets.............. 8.04% 7.73% 7.94% 7.99%
Weighted average cost of total
interest-bearing liabilities.................. 4.62% 4.55% 4.47% 4.67%
Interest rate spread during period................ 3.42% 3.18% 3.47% 3.32%
Net yield on interest-earning assets
(net interest income divided by average
interest-earning assets on annualized basis).. 3.54% 3.43% 3.57% 3.51%
Total interest income divided by average
total assets (on annualized basis)............ 7.40% 7.17% 7.31% 7.41%
Total interest expense divided by
average total assets (on annualized basis).... 4.17% 4.05% 4.02% 4.15%
Net interest income divided by average
total assets (on annualized basis)............ 3.25% 3.18% 3.29% 3.25%
Return on assets (net income divided by
average total assets on annualized basis)..... 1.21% 1.38% 1.20% 1.42%
Return on equity (net income divided by
average total equity on annualized basis)..... 14.54% 14.70% 13.61% 15.07%
Net interest margin to average earning Assets..... 3.54% 3.43% 3.57% 3.51%
Net interest margin to average assets............. 3.25% 3.18% 3.29% 3.25%
</TABLE>
At March 31,
----------------
2000 1999
---- ----
Book value per share outstanding ........... $14.30 $13.79
Interest rate spread ....................... 3.46% 3.36%
Nonperforming Assets:
Loans: Non-accrual ................... $2,835 $6,315
Past due 90 days or more ...... 0 0
Restructured .................. 390 0
------ ------
Total nonperforming loans ............ 3,225 6,315
Real estate owned, net ............... 1,447 1,028
Other repossessed assets, net ........ 41 176
------ ------
Total Nonperforming Assets ........... $4,713 $7,519
====== ======
Nonperforming assets divided by total assets 0.58% 1.02%
Nonperforming loans divided by total loans . 0.51% 1.05%
Balance in Allowance for Loan Losses ....... $4,735 $4,470
- 12 -
<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 March 31, 2000
will not be materially different from the results presented on page 12 of the
annual report for fiscal year 1999.
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
- -----------------------------------------
N/A
- 13 -
<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: May 10, 2000 /S/ Lawrence E. Welker
------------- ------------------------------------------
Lawrence E. Welker, Executive Vice President,
Treasurer, and Chief Financial Officer
- 14 -
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial
information extracted from the registrant's
unaudited consolidated financial statements
and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000867493
<NAME> Home Federal Bancorp
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 20,556
<INT-BEARING-DEPOSITS> 4,300
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 100,141
<INVESTMENTS-CARRYING> 6,782
<INVESTMENTS-MARKET> 6,933
<LOANS> 627,616
<ALLOWANCE> 4,735
<TOTAL-ASSETS> 807,423
<DEPOSITS> 577,149
<SHORT-TERM> 0
<LIABILITIES-OTHER> 5,858
<LONG-TERM> 0
0
0
<COMMON> 8,269
<OTHER-SE> 60,406
<TOTAL-LIABILITIES-AND-EQUITY> 807,423
<INTEREST-LOAN> 37,409
<INTEREST-INVEST> 4,546
<INTEREST-OTHER> 385
<INTEREST-TOTAL> 42,340
<INTEREST-DEPOSIT> 17,699
<INTEREST-EXPENSE> 23,301
<INTEREST-INCOME-NET> 19,039
<LOAN-LOSSES> 1,037
<SECURITIES-GAINS> (116)
<EXPENSE-OTHER> 12,135
<INCOME-PRETAX> 11,382
<INCOME-PRE-EXTRAORDINARY> 11,382
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,943
<EPS-BASIC> 1.44
<EPS-DILUTED> 1.37
<YIELD-ACTUAL> 3.90
<LOANS-NON> 2,835
<LOANS-PAST> 0
<LOANS-TROUBLED> 390
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,349
<CHARGE-OFFS> 718
<RECOVERIES> 67
<ALLOWANCE-CLOSE> 4,735
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>