SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities and Exchange Act of 1934
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For Quarter Ended Commission File Number
June 30, 1998 0-22376
HOME BANCORP
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(Exact name of registrant as specified in its charter)
Indiana 35-1906765
- -------------------------- --------------------------
(State or other jurisdiction or (I.R.S. Employer Identification
incorporation or organization) Number)
132 East Berry Street, P.O. Box 989
Fort Wayne, Indiana 46801-0989
- ----------------------------------- --------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (219) 422-3502
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 [ ]
As of June 30, 1998, there were 3,380,525 shares of common stock issued and
2,351,021 shares outstanding.
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements of Home Bancorp
Consolidated Balance Sheets as of June 30, 1998
and September 30, 1997
Consolidated Statements of Income for the three months
and nine months ended June 30, 1998 and 1997
Consolidated Statements of Cash Flow for the
nine months ended June 30, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation
PART II. OTHER INFORMATION
SIGNATURES
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
And wholly owned subsidiary
HOME LOAN BANK fsb
Fort Wayne, Indiana
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 (unaudited) and SEPTEMBER 30, 1997
(unaudited)
ASSETS June 30, 1998 September 30, 1997
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<S> <C> <C>
Cash on hand and in other banks .................................. $ 1,514,857 $ 1,282,926
Interest earning deposits in other banks ......................... 10,346,881 8,162,372
Federal funds sold ............................................... 6,000,000 7,000,000
------------- -------------
Cash and cash equivalents ........................................ 17,861,738 16,445,298
Investment securities available for sale ......................... 5,087,500 11,126,562
Investment securities held to maturity
(Market value $12,161,250; $27,213,750) ..................... 12,021,003 26,954,555
Loans receivable, net
(Allowance for loan losses $1,389,789; $1,387,989) .......... 318,195,115 283,986,922
Federal Home Loan Bank stock ..................................... 2,782,500 2,449,100
Accrued interest receivable ...................................... 1,914,193 2,049,564
Bank premises & equipment ........................................ 2,570,053 2,710,492
Intangible assets ................................................ -- --
Foreclosed real estate, net ...................................... -- --
Deferred & current income taxes .................................. (348,148) 116,739
Other assets ..................................................... 202,197 202,070
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TOTAL ASSETS ..................................................... $ 360,286,151 $ 346,041,302
============= =============
LIABILITIES
Deposits ......................................................... $ 306,424,298 $ 297,492,625
Federal Home Loan Bank advances .................................. 7,000,000 --
Advances from borrowers for taxes and insurance .................. 1,462,800 2,092,412
Accrued interest payable ......................................... 1,043,597 971,296
Other liabilities ................................................ 1,408,188 1,493,917
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TOTAL LIABILITIES ................................................ 317,338,883 302,050,250
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
And wholly owned subsidiary
HOME LOAN BANK fsb
Fort Wayne, Indiana
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 (unaudited) and SEPTEMBER 30, 1997 (continued)
(unaudited)
June 30, 1998 September 30, 1997
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<S> <C> <C>
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 5,000,000 shares authorized,
none issued ................................................. -- --
Common stock, no par value, 10,000,000 shares authorized,
3,380,525; 3,381,305 issued, 2,351,021; 2,467,238 outstanding 34,332,020 33,985,413
Retained earnings, substantially restricted ...................... 29,365,803 27,618,839
Unearned ESOP compensation ....................................... (1,598,919) (1,769,379)
Unearned RRP compensation ........................................ (550,251) (714,294)
Treasury stock 1,029,504; 914,067 shares, at cost ................ (18,626,923) (15,180,548)
Net unrealized gain on securities available for sale ............. 25,538 51,021
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TOTAL STOCKHOLDERS' EQUITY ....................................... 42,947,268 43,991,052
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ......................... $ 360,286,151 $ 346,041,302
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
And wholly owned subsidiary
HOME LOAN BANK fsb
Fort Wayne, Indiana
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(unaudited)
3 Months Ended: June 30, 9 Months Ended: June 30,
1998 1997 1998 1997
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans receivable ....................... $ 5,960,043 $ 5,222,926 $17,316,199 $15,209,567
Investment securities .................. 505,684 933,903 2,054,994 2,885,711
----------- ----------- ----------- -----------
Total interest income .................. 6,465,727 6,156,829 19,371,193 18,095,278
INTEREST EXPENSE
Deposits ............................... 3,966,611 3,769,116 12,072,825 10,997,246
Advances ............................... 36,736 -- 40,630 --
----------- ----------- ----------- -----------
Total interest expense ................. 4,003,347 3,769,116 12,113,455 10,997,246
Net interest income .................... 2,462,380 2,387,713 7,257,738 7,098,032
Provision for loan losses .............. 600 600 1,800 1,800
----------- ----------- ----------- -----------
Net interest income after provision .... 2,461,780 2,387,113 7,255,938 7,096,232
NON-INTEREST INCOME
Net gain-sale of interest earning assets 3,518 -- 108,406 --
Net gain-sale of real estate ........... -- -- -- --
Fees and service charges ............... 80,750 64,407 222,916 178,933
----------- ----------- ----------- -----------
Total non-interest income .............. 84,268 64,407 331,322 178,933
NON-INTEREST EXPENSE
Compensation & employee benefits ....... 786,132 658,607 2,318,925 2,019,839
Net occupancy & equipment .............. 148,301 156,035 437,855 440,180
FDIC insurance premiums ................ 47,231 44,886 139,427 207,566
Other general & administrative expenses 275,537 306,332 745,038 872,115
----------- ----------- ----------- -----------
Total non-interest expense ............. 1,257,201 1,165,860 3,641,245 3,539,700
Earnings before income tax ............. 1,288,847 1,285,660 3,946,015 3,735,465
Income tax expense ..................... 539,847 547,660 1,693,015 1,546,465
----------- ----------- ----------- -----------
NET INCOME ............................. $ 749,000 $ 738,000 $ 2,253,000 $ 2,189,000
=========== =========== =========== ===========
Earnings per share, basic .............. $ 0.34 $ 0.31 $ 1.02 $ 0.90
Earnings per share, assuming dilution .. $ 0.33 $ 0.31 $ 0.98 $ 0.88
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
Fort Wayne, Indiana
STATEMENTS OF CASH FLOW
NINE MONTHS ENDED JUNE 30, 1998 AND 1997
(unaudited)
1998 1997
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income ................................................................ $ 2,253,000 $ 2,189,000
Adjustments to reconcile net income to net cash from operating activities
Depreciation ......................................................... 159,834 153,787
Provision for loan losses ............................................ 1,800 1,800
Gain on sale of securities ........................................... (108,406) --
Gain on sale of loans ................................................ -- --
Gain on sale of foreclosed real estate ............................... -- --
Loans originated for sale ............................................ (87,500) --
Proceeds from loan sales ............................................. -- --
ESOP expense ......................................................... 566,206 415,313
Amortization of RRP contribution ..................................... 175,939 178,952
Loss on disposal of premises and equipment ........................... -- 770
Amortization of premiums and accretion of discounts, net ............. (80,872) (41,493)
Change in
Accrued interest receivable ........................................ 135,371 223,311
Other liabilities .................................................. (13,428) (1,567,044)
Other assets ....................................................... 573,206 368,447
------------ ------------
Net cash from operating activities .............................. 3,575,150 1,922,843
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from maturities of securities held to maturity .............. 15,000,000 28,000,000
Proceeds from sales of securities available for sale ................. 10,286,815 --
Purchase of securities available for sale ............................ (3,985,125) (2,006,094)
Purchase of securities held to maturity .............................. -- (8,063,750)
Purchase of Federal Home Loan Bank stock ............................. (333,400) (394,900)
Net change in loans .................................................. (34,122,493) (22,160,347)
Purchase of premises and equipment ................................... (19,395) (296,432)
------------ ------------
Net cash from investing activities .............................. (13,173,598) (4,921,523)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
Fort Wayne, Indiana
STATEMENTS OF CASH FLOW
NINE MONTHS ENDED JUNE 30, 1998 AND 1997
(unaudited)
(continued)
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Net change in deposit ................................................ 8,931,673 16,519,642
Advances from Federal Home Loan Bank ................................. 7,000,000 --
Increase in advance payments by borrowers for taxes and insurance .... (629,612) (592,477)
Purchase of treasury stock, net of reissuance of shares .............. (3,781,136) (4,716,521)
Cash dividends paid .................................................. (506,037) (362,311)
------------ ------------
Net cash provided by financing activities ....................... 11,014,888 10,848,333
Net change in cash and cash equivalents ................................... 1,416,440 7,849,653
Cash and cash equivalents, beginning of period ............................ 16,445,298 11,922,568
------------ ------------
Cash and cash equivalents, end of period .................................. $ 17,861,738 $ 19,772,221
============ ============
Supplemental disclosures of cash flow information
Cash paid for
Interest on deposits ............................................... $ 12,012,927 $ 10,887,572
Interest on advances from Federal Home Loan Bank ................... 28,226 --
Income taxes ....................................................... 790,000 1,302,976
</TABLE>
<PAGE>
Home Bancorp
Fort Wayne, IN
Notes to Consolidated Financial Statements
(Unaudited)
Item 1
Summary of Significant Accounting Policies
A. Basis of Presentation
The interim financial statements for Home Bancorp (the "Company") and its
wholly-owned subsidiary, Home Loan Bank fsb (the "Bank"), have been prepared in
accordance with the instructions to Form 10-Q; and, therefore, do not include
all information and footnotes normally shown for full annual financial
statements.
The interim financial statements at June 30, 1998 and for the interim periods
ended June 30, 1998, and 1997 are unaudited, but reflect all adjustments
(consisting of only normal recurring adjustments) which are, in the opinion of
management, necessary to present fairly the financial position, results of
operations and cash flows for such periods.
These interim financial statements should be read in conjunction with the
Company's most recent annual financial statements and footnotes. The results of
the periods presented are not necessarily representative of the results of
operations and cash flows which may be expected for the entire year.
B. Employee Stock Ownership Plan (ESOP)
The ESOP, a tax qualified employee benefit plan for officers and employees of
the Company and the Bank, purchased 231,209 shares of common stock offered in
the conversion to a public company on March 29, 1995. The ESOP purchased the
shares with funds borrowed for such purpose from the Company. The ESOP will
repay the loan through periodic tax-deductible contributions from the Bank over
a 12-year period with interest at the applicable Federal Rate as set forth under
the Internal Revenue Code of 1986, as amended.
C. Stock Option and Incentive Plan (SOP) and Recognition and Retention Plan
(RRP)
On October 10, 1995 at a special meeting of the shareholders, a stock option and
incentive plan (SOP) and recognition and retention plan (RRP) were approved.
Both benefit plans are administered by the compensation committee of the
Company. This committee selects recipients and terms of awards pursuant to the
plan. The maximum total shares intended to be made available under the SOP and
RRP plans are 330,317 and 115,611, respectively. Of the shares available under
the SOP, 225,795 shares have been awarded to directors and officers, subject to
certain vesting requirements over a 5 year period, and exercisable over a term
not to exceed ten years from the date of the grant, October 10, 1995. A total of
77,347 shares under the RRP have been awarded to directors, officers and
employees of the Company subject to certain vesting and employment requirements
over a five year period commencing one year from the date of the grant on
October 10, 1995. All options and grants are priced at $15.25, equal to the fair
market value of the shares on the date of the grants.
<PAGE>
Home Bancorp
Fort Wayne, IN
Notes to Consolidated Financial Statements
(Unaudited)
Item 1 Continued
D. New Accounting Pronouncements
Recent pronouncements by the Financial Accounting Standards Board (FASB) may
have an impact on financial statements issued in this and subsequent periods.
These standards include the following Statements of Accounting Financial
Standards (SFAS):
1) SFAS No. 128, "Earnings Per Share," revises the accounting
requirements for calculating earnings per share. Basic earnings per share for
the quarter ended December 31, 1997 and later will be calculated solely on the
average common shares outstanding. Diluted earnings per share will reflect the
potential dilution of stock options and other common stock equivalents. All
prior calculations will be restated to be comparable to new methods.
2) SFAS No. 130, "Reporting Comprehensive Income," establishes
standards for reporting and display of comprehensive income and its components
(revenue, expenses, gains and losses) in a full set of general-purpose financial
statements. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. Income tax effects must also be shown. This
Statement is effective for fiscal years beginning after December 15, 1997.
3) SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," establishes standards for the way public business
enterprises report information about operating segments in annual financial
statements and requires those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. This statement is effective for financial
statements for periods beginning after December 15, 1997.
Management has determined that the impact of the adoption of these statements on
the financial position or results of operations will not be material.
E. Earnings Per Share
Basic earnings per common share are calculated by dividing net earnings by the
average number of common shares outstanding during the period (total shares
issued less unallocated shares in the Employee Stock Ownership Plan and less
treasury shares). Diluted earnings per share takes into account the effect of
dilution from the assumed exercise of all outstanding stock options. Diluted
earnings per share are calculated by dividing net earnings by the average number
of common shares outstanding adjusted for the incremental shares resulting from
the exercise of dilutive options during the period. All prior amounts have been
restated to be comparable.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2
General
Home Bancorp (the "Company") was formed as an Indiana corporation on December
14, 1993 for the purpose of issuing Common Stock and owning all of the
outstanding shares of the Company. On March 29, 1995, Home Bancorp acquired all
the capital stock of the Bank upon its Conversion from a mutual to stock
institution. Prior to the conversion, the Company had no operating history. The
principal business of savings banks, including Home Loan, has historically
consisted of attracting deposits from the general public and making loans
secured by residential real estate. The Company's earnings are primarily
dependent on net interest income, the difference between interest income and
interest expense. This is a function of the yield on interest-earning assets
less the cost of interest-bearing liabilities. Earnings are also affected by
provisions for loan losses, service charges and fee income, operating expenses
and income taxes.
The most significant outside factors influencing the operations of the Bank and
other savings institutions include general economic conditions, competition in
the local market place and the related monetary and fiscal policies of agencies
that regulate financial institutions. More specifically, the cost of funds
(deposits) is influenced by interest rates on competing investments and general
market rates of interest, while lending activities are influenced by the demand
for real estate financing, which in turn is affected by the interest rates at
which such loans may be offered and other factors affecting loan demand and
funds availability.
When used in this Form 10-Q or future filings by the Company with the Securities
and Exchange Commission, in the Company's press releases or other public or
shareholder communications, or in oral statements made with the approval of an
authorized executive officer, the words or phrases "will likely result", "are
expected to", "will continue", "is anticipated", "estimated", "project",
"believe" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and
to advise readers that various factors, including regional and national economic
conditions, changes in the levels of market interest rates, credit risks of
lending activities, and competitive and regulatory factors, could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from those anticipated or projected.
The Company does not undertake, and specifically disclaims any obligation, to
publicly release the result of revisions which may be made to forward-looking
statements to reflect the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
Financial Condition
The Company's total assets were $360.3 million as of June 30, 1998 compared to
$346.0 million as of September 30, 1997, an increase of $14.3 million. For the
same period, equity decreased from $44.0 million as of September 30, 1997 to
$42.9 million as of June 30,1998. The growth in total assets was the result of
continued growth in the Company's loan portfolio funded by modest deposit growth
and advances from the Federal Home Loan Bank ("FHLB"). The net decrease in
equity for the period ended June 30, 1998 was primarily the result of the
repurchase of 137,942 shares of the Company's common stock held as treasury
stock, net of shares issued from the exercise of options. The treasury stock
purchases represented $3.8 million.
Loans receivable increased $34.2 million, primarily from 1-4 family residential
originations, from $284.0 million at September 30, 1997 to $318.2 million at
June 30, 1998. Deposits increased $8.9 million for the nine months ended June
30, 1998 from $297.5 million as of September 30, 1997 to $306.4 million as of
June 30, 1998.
Cash and cash equivalents increased from $16.4 million as of September 30, 1997
to $17.9 million as of June 30, 1998, an increase of approximately $1.5 million.
Investment securities available for sale decreased $6.0 million to $5.1 million
for the nine month period ended June 30,1998 while securities held to maturity
decreased $15.0 million, from $27.0 million as of September 30, 1997 to $12.0
million as of June 30, 1998. The decrease in investment securities was the
result of the maturity and sale of securities to fund continued loan portfolio
growth and the stock repurchase program.
The balance in Federal Home Loan Bank stock increased from $2.4 million as of
September 30, 1997 to $2.8 million as of June 30, 1998 from the purchase of
additional stock in fulfillment of minimum FHLB stock requirements.
Income taxes, current and deferred, as of June 30, 1998 reflect timing
differences on the remittance of accrued income tax liabilities for the current
quarter of the fiscal year in comparison to September 30, 1997.
During the period ended June 30, 1998, the Company had $7.0 million in
outstanding advances from the FHLB while it had no borrowings as of September
30, 1997. The funds are being used to fund continued loan growth in residential
lending in the Bank's service area.
Advances from borrowers for taxes and insurance decreased from $2.1 million as
of September 30, 1997 to $1.5 million as of June 30, 1998 primarily from the
timing of semi-annual payments of real estate taxes and annual insurance
premiums on behalf of loan customers.
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
Results of Operation
General. Net income for the three months ended June 30, 1998 increased by
$11,000, or 1.5%, to $749,000 from $738,000 for the same period ended June 30,
1997. For the nine months ended June 30, 1998, net income was $2,253,000, an
increase of $64,000, or 2.9%, for the comparable prior year period. These
increases were attributed to an increase in net interest income for the periods
from growth in earning assets, gains on the sale of investments, but partially
offset by increases in non-interest expenses and in provisions for tax
liabilities.
The three month earnings represent an annualized return on average assets (ROA)
of 0.85% and a return on average equity (ROE) of 7.01%. For the nine month
period ended June 30, 1998, earnings represent an annualized average ROA of
0.86% and a ROE of 7.01%.
Net Interest Income. The Company's net income is primarily dependent upon net
interest income. Net interest income for the three and nine month periods ended
June 30, 1998 increased by approximately $75,000 and $160,000, respectively,
compared to the same periods in 1997. These increases were primarily the result
of increased balances of the Company's interest-earning assets.
Total interest income at June 30, 1998 increased by approximately $309,000 for
the three month period, and approximately $1,276,000 for the nine month period
when compared with the results for the same periods ended June 30, 1997. The
yield on interest-earning assets decreased from 7.48% for the three month period
ended June 30, 1997 to 7.43% for the same period ended June 30, 1998. The yield
on interest-earning assets during the nine month period ended June 30, 1998
increased to 7.49%, up from 7.44% for the same period in 1997. Growth in total
interest income during these periods was indicative of continued growth in
interest-earning assets, but also reflected the impact of lower yields on those
assets.
The growth in total interest income was significantly negated by increased
interest expense in both the three month and nine month periods ended June 30,
1998. These increases were generally from increased balances of
costing-liabilities as average funding costs were either decreasing or nearly
constant from prior year periods. For the three month period ended June 30,
1998, the average cost of interest-bearing liabilities was 5.23%, down from
5.36% for the same period in 1997. For the nine month period ended June 30,
1998, the average cost of interest-bearing liabilities was 5.32% compared to
5.31% for the like period in 1997. The Company's average costs of funds continue
to be higher than those experienced by national peers, however, the decrease in
the average cost for the current three month period in comparison to the current
nine month period is the result of lessening of competitive pressures on market
rates for deposits in the Company's service area.
While the interest rate environment of recent years has proven beneficial to
most financial institutions, including the Company, increases in market rates of
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
interest generally adversely affect the net income of most financial
institutions. Because the Company's liabilities generally reprice more quickly
than assets, interest margins would likely decrease if interest rates were to
rise, or the yield on repricing assets was not enhanced.
Provision for Loan Losses. The provision for loan losses is a result of
management's periodic analysis of the adequacy for loan losses. The provision
for loan losses was $600 for the three months ended June 30, 1998 and $1,800 for
the nine month period ended that date. There were no changes in either period
from the prior year periods ended June 30, 1997.
Changes in the provision for loan losses are attributed to management's analysis
of the adequacy of the allowance for loan losses to both recognizable and
unforeseen losses. At June 30, 1998, the Company's allowance for loan losses
totaled $1.4 million or .44% of net loans receivable and 403% of total
nonperforming loans.
The Company establishes an allowance for loan losses based on an analysis of
risk factors in the loan portfolio. This analysis includes, among other factors,
the level of the Company's classified and nonperforming assets and their
estimated value, the national economic outlook which may tend to inhibit
economic activity and depress real estate and other values in the Company's
primary market area, regulatory issues, and the levels of the allowance for loan
losses established by the Company's peers in assessing the adequacy of the loan
loss allowance. Accordingly, the calculation of the adequacy of the allowance
for loan losses is not based directly on the level of nonperforming loans.
The Company will continue to monitor its allowance for loan losses and make
future additions to the allowance through the provision for loan losses as
economic conditions dictate. Although the Company maintains its allowance for
loan losses at a current level which it considers to be adequate to provide for
losses, there can be no assurance that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be required in
future periods. In addition, the Company's determination as to the amount of the
allowance for loan losses is subject to review by the OTS, as part of their
examination process, which may result in the establishment of an additional
allowance based upon their judgment of the information available to them at the
time of their examination.
Non-Interest Income. Non-interest income consists primarily of service fees on
deposit accounts, loan servicing and late fees, as well as, any recognized gain
from the sale of interest earning assets. Non-interest income increased
approximately $20,000 for the three month period ended June 30, 1998 in
comparison to the like period in 1997. For the nine month period ended June 30,
1998, non-interest income increased by approximately $152,000 from a year
earlier. These increases were primarily attributed to the sale of securities
held available-for-sale. There were no sale of securities during like periods in
1997. Fees and service charges also contributed to these increases in both the
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
three and nine month periods ended June 30, 1998 with increases of approximately
$16,000 and $44,000, respectively, over results experienced in 1997. These
increases were from increased customer service related fees and/or bank imposed
charges.
Non-Interest Expense. Non-interest expenses for the three and nine month periods
ended June 30, 1998, were approximately $1,257,000 and $3,641,000, respectively,
compared to $1,166,000 and $3,540,000 reported from the same prior year periods.
For the periods ended June 30, 1998, compensation and employee benefits
increased approximately $128,000 and $299,000 for the respective three and six
month periods as compared to 1997. These increases were primarily attributed to
general inflationary increases, to staffing needs associated with asset growth
and increased ESOP expense due to the appreciation in the Company's stock price.
FDIC insurance premium expense decreased by approximately $68,000 in the nine
month period when compared to 1997 as a result of the lowering of of deposit
insurance following the recapitalization of the insurance fund on September 30,
1996. Other general and administrative expenses were approximately $31,000 and
$127,000 lower for the respective three and nine month periods ended June 30,
1998, when compared to the like periods in 1997, primarily from income on loan
originations that was applied to costs.
Income Tax Expense. Income tax expense for the nine month period ended June 30,
1998 increased by approximately $147,000 over the like period in 1997 primarily
from higher pretax earnings during the period.
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
The following table provides key ratios and balances for the periods indicated.
(For calculation purposes, month-end averages, which do not differ materially
from daily averages, have been used.)
<TABLE>
<CAPTION>
At and For the At and For the
Three Months Ended Nine Months Ended
June 30, June 30,
FINANCIAL HIGHLIGHTS (Averages) 1998 1997 1998 1997
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Return on assets ...................................... 0.85% 0.89% 0.86% 0.89%
Return on equity ...................................... 7.01% 6.61% 7.01% 6.43%
Yield on interest-earning assets ...................... 7.43% 7.48% 7.49% 7.44%
Cost of interest-bearing liabilities .................. 5.23% 5.36% 5.32% 5.31%
Net interest spread ................................... 2.20% 2.12% 2.17% 2.13%
Net interest rate margin .............................. 2.78% 2.89% 2.75% 2.86%
Net interest income to operating (G&A) expenses ....... 195.86% 204.80% 199.32% 200.53%
Operating (G&A) expenses to assets .................... 1.42% 1.41% 1.38% 1.43%
Non-interest income to assets ......................... 0.10% 0.08% 0.13% 0.07%
Interest-earning assets to interest-bearing liabilities 113.64% 115.32% 113.74% 115.87%
Efficiency ratio ...................................... 49.37% 47.54% 47.98% 48.64%
Equity to assets ...................................... 12.07% 13.50% 12.20% 13.88%
Tangible equity to assets ............................. 12.07% 13.50% 12.20% 13.88%
Average assets (dollars in thousands) ................. $ 353,980 $ 330,894 $ 351,267 $ 326,951
ASSET QUALITY RATIOS
Non-performing assets to total assets ................. 0.10% 0.05%
Non-performing loans to net loans ..................... 0.11% 0.06%
Allowance for loan losses to net loans ................ 0.44% 0.51%
Allowance for loan losses to non-performing loans ..... 403% 836%
Net charge offs to loans .............................. -- --
Loans to deposits ..................................... 103.84% 94.70%
Loans to assets ....................................... 88.32% 81.37%
PER COMMON SHARE
Net income ............................................ $ 0.34 $ 0.31 $ 1.02 $ 0.90
Net income (diluted) .................................. $ 0.33 $ 0.31 $ 0.98 $ 0.88
Book value ............................................ $ 18.27 $ 17.62
Tangible book value ................................... $ 18.27 $ 17.62
STOCK PRICE
High .................................................. $ 35.375 $ 20.875
Low ................................................... $ 29.125 $ 20.125
Close ................................................. $ 29.375 $ 20.875
</TABLE>
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
Liquidity and Capital Resources
The Company's primary source of funds are deposits, principal and interest
payments on loans, and maturities of investment securities. While maturities of
investment securities and scheduled amortizations of loans are a predictable
source of funds, deposit flows and mortgage prepayments are greatly influenced
by general interest rates, economic conditions and competition. In addition, if
the Bank requires additional funds beyond its ability to acquire them locally,
it has borrowing capability through the Federal Home Loan Bank (the "FHLB") of
Indianapolis. At June 30, 1998, the Bank had $7.0 million in advances from the
FHLB of Indianapolis.
Home Loan Bank is required by federal regulations to maintain specific levels of
"liquid" assets consisting of cash and other eligible investments. The standard
measure of liquidity for thrift institutions is the ratio of qualifying assets
due within one year to net withdrawable savings. Currently the minimum
requirement is 4%. At June 30, 1998, the Bank's liquidity ratio was 7.69%. As of
September 30, 1997, the Bank's liquidity was 16.0%.
The Bank uses its liquidity resources principally to meet ongoing loan
commitments, to fund maturing certificates of deposit and deposit withdrawals
and to meet operating expenses. The Bank anticipates that it will have
sufficient funds available to meet current loan commitments and those liquidity
needs. At June 30, 1998, the Bank had outstanding commitments to extend credit
which amounted to $17.3 million (including $12.2 million in unused lines of
credit). Management believes that loan repayments and other sources of funds
will be adequate to meet the Bank's foreseeable liquidity needs.
The institution is required to maintain specific amounts of regulatory capital
pursuant to regulations of the Office of Thrift Supervision. Regulatory
standards impose the following capital requirements: a risk-based capital
expressed as a percent of risk-adjusted assets, a leverage ratio of core capital
to total adjusted assets, and a tangible capital ratio expressed as a percent of
total adjusted assets. As of June 30, 1998, the Bank's capital totaled $33.8
million, or 9.56% of tangible and core capital. Risk-based capital totaled $35.2
million, or represented 19.46% of risk-based assets. The institution
substantially exceeded all regulatory capital standards.
The Year 2000 Issue
The Company is aware of the issues associated with the programming code in
existing computer systems as the Year 2000 approaches. The "Year 2000" problem
will affect virtually every computer operation in some way by the rollover of
the two digit value to 00. The issue is whether computer systems will properly
recognize date-sensitive information when the year changes to 2000. Systems that
do not properly recognize such information could generate erroneous data or
cause a system to fail.
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 2 Continued
The Company recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 failures. The Company has established a process for
evaluating and managing risks associated with this issue. An assessment of the
Year 2000 compliance of the Company's computer systems has been completed. The
Company has established a plan for testing systems and interfaces. The Company
has also assessed the vulnerability of its customer base to Year 2000 problems
and potential repayment issues for the Bank. The Company also has required its
data processor, NCR Corporation that provides most of the Company's mission
critical operations, and other software vendors to represent that their products
are, or will be, Year 2000 compliant. In addition, these parties are being
required to test or have adopted a program of testing for compliance.
The Company had previously identified and scheduled for replacement this
calendar year most of its computer hardware, communication, and software
programs. The Company recently signed contracts in these regards for the
purchase and installation of this equipment during the next six months. The
approximate cost is $600,000.
Market Risk
The Company is exposed to the impact of interest rate changes and changes in the
market value of its investments. The Company currently focuses lending efforts
toward originating competitively priced adjustable-rate loan products with
maturities out thirty years and fixed-rate loan products with maturities not to
exceed twenty years. This allows the Company to maintain a portfolio of loans
which will be sensitive to changes in interest rates while providing a
reasonable spread to the cost of liabilities used to fund the loans.
The Company's primary objective for its investment portfolio is to provide the
liquidity necessary to meet loan funding needs. This portfolio is used in the
ongoing management of changes to the Company's asset/liability mix, while
contributing to profitability through earnings flow. The investment policy
generally calls for funds to be invested in overnight fed funds, government and
agency securities with relatively short maturities based upon the Company's need
for liquidity, desire to achieve a proper balance between risk while maximizing
yield, and to fulfill the Company's asset/liability management goals.
The company emphasizes and promotes its savings, money market, demand and NOW
accounts, and certificates of deposit with maturities of 91 days through twelve
years, principally from its primary market area. The savings, money market, and
NOW accounts tend to be less susceptible to rapid changes in interest rates. The
acceptance of longer term certificates of deposit generally offers the Company a
lower cost source of funding for longer term lending than borrowings, and
provides a good asset/liability match on these products.
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 2 Continued
In managing its asset/liability mix, the Company, at times, depending on the
relationship between long- and short-term interest rates, market conditions and
consumer preference, as well as, consideration to the Company's total risk
profile may place greater emphasis on maximizing its net interest margin than
strictly matching the interest rate sensitivity of its assets and liabilities.
Management believes that the increased net income which may result from an
acceptable mismatch in actual maturity or repricing of its asset and liability
portfolios can, during periods of declining or stable interest rates, provide
sufficient returns to justify the increased exposure to sudden and unexpected
increases in interest rates which may result from such a mismatch. The Company
has established levels of acceptable risks, which may from time to time be
exceeded in recognition of those instances previously discussed. There can be no
assurance, however, that in the event of an adverse change in interest rates the
Company's efforts to limit interest rate risk will be successful.
Net Portfolio Value. The Company uses a Net Portfolio Value ("NPV") approach to
the quantification of interest rate risk. This approach calculates the
difference between the present value of expected cash flows from assets and the
present value of expected cash flows from liabilities, as well as cash flows
from off-balance sheet items. Management of the Company's assets and liabilities
is performed within the context of the marketplace, but subject to levels deemed
acceptable by the Board. Generally, the Board has chosen to monitor and adjust
exposures rather than limits.
Presented below, as of June 30, 1998, is an analysis of the Company's interest
rate risk as prepared by OTS for changes in NPV for an instantaneous and
sustained parallel shift in the yield curve, in 100 basis point increments, up
and down 300 basis points. As illustrated in the table , the Company's NPV is
more sensitive to rising rate changes than declining rates. This occurs
primarily because, as rates rise, the market value of fixed-rate loans declines
due both to the rate increase and the related slowing of prepayments. When rates
decline, the Company does not experience a significant rise in market value for
these loans because borrowers prepay at relatively higher rates.
At June 30, 1998
- --------------------------------------------------------------------------------
Change in Interest Rate Board Limit $ Change % Change
(Basis Points) % Change (In Thousands)
+300 bp (27) ($16,346) (43)
+200 bp (20) ($10,171) (27)
+100 bp (12) ($ 4,389) (11)
0 bp - - -
-100 bp ( 9) $ 1,745 5
-200 bp (12) $ 488 1
-300 bp (19) ($ 884) (2)
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 2 Continued
similar maturities or periods of repricing, they may react in different degrees
to changes in interest rates. Also, the interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets such as adjustable-rate mortgage loans, have
features which restrict changes in interest rates on a short-term basis and over
the life of the asset. Further, in the event of a change in interest rates,
prepayments and early withdrawal levels would likely deviate from those assumed
in calculating the table. Finally, the ability of some borrowers to service
their debt may decrease in the event of an interest rate increase. The Company
considers all of those factors in monitoring its exposure to interest rate risk.
<PAGE>
Home Bancorp
Fort Wayne, IN
Part II Other Information
Item 1 Legal Proceedings
There were no material proceedings to which Home Bancorp or Home Loan Bank fsb
is a party or of which any of their property is subject. From time-to-time, the
Bank is a party to various legal proceedings incident to its business.
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 other Information
None
Item 6 Exhibits and Reports on Form 8-k
Press release filed on Form 8-k for the quarter ended June 30, 1998 and
subsequent to that date include:
Date of Report Subject
-------------- -------
6-16-98 Declaration of Cash Dividend
7-28-98 Third Quarter Year Fiscal Year 1998 Earnings
<PAGE>
Home Bancorp
Fort Wayne, IN
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Home Bancorp
Date: August 7, 1998 /s/ W. Paul Wolf
----------------
W. Paul Wolf
Chairman, President, CEO
Date: August 7, 1998 /s/ Matthew P. Forrester
------------------------
Matthew P. Forrester
Vice President, Treasurer
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,515
<INT-BEARING-DEPOSITS> 10,347
<FED-FUNDS-SOLD> 6,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,087
<INVESTMENTS-CARRYING> 12,021
<INVESTMENTS-MARKET> 12,161
<LOANS> 318,195
<ALLOWANCE> 1,390
<TOTAL-ASSETS> 360,286
<DEPOSITS> 306,424
<SHORT-TERM> 7,000
<LIABILITIES-OTHER> 3,915
<LONG-TERM> 0
0
0
<COMMON> 34,332
<OTHER-SE> 8,615
<TOTAL-LIABILITIES-AND-EQUITY> 360,286
<INTEREST-LOAN> 17,316
<INTEREST-INVEST> 2,055
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<INTEREST-TOTAL> 19,371
<INTEREST-DEPOSIT> 12,073
<INTEREST-EXPENSE> 41
<INTEREST-INCOME-NET> 7,258
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<EXPENSE-OTHER> 3,641
<INCOME-PRETAX> 3,946
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