SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20594
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1998 Commission File No. 0-22376
HOME BANCORP
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(exact name of registrant as specified in its charter)
Indiana 35-1906765
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
132 East Berry Street,
P.O. Box 989, Fort Wayne, Indiana 46801-0989
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 219-422-3502
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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 March 31, 1998, there were 3,380,525 shares of common stock issued and
2,357,584 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 March 31, 1998
and September 30, 1997
Consolidated Statements of Income for the three and six months
ended March 31, 1998 and 1997
Consolidated Statements of Cash Flows for the
six months ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
SIGNATURES
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HOME BANCORP
And wholly owned subsidiary
HOME LOAN BANK fsb
Fort Wayne, Indiana
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 (unaudited) and SEPTEMBER 30, 1997
(unaudited)
ASSETS March 31, 1998 September 30, 1997
-------------- ------------------
<S> <C> <C>
Cash on hand and in other banks .................................. $ 1,456,776 $ 1,282,926
Interest earning deposits in other banks ......................... 13,257,564 8,162,372
Federal funds sold ............................................... 2,600,000 7,000,000
------------- -------------
Cash and cash equivalents ........................................ 17,314,340 16,445,298
Investment securities available for sale ......................... 9,088,125 11,126,562
Investment securities held to maturity
(Market value $14,176,563; $27,213,750) ..................... 14,013,080 26,954,555
Loans receivable, net
(Allowance for loan losses $1,389,189; $1,387,989) .......... 305,998,677 283,986,922
Federal Home Loan Bank stock ..................................... 2,449,100 2,449,100
Accrued interest receivable ...................................... 1,877,520 2,049,564
Bank premises & equipment ........................................ 2,609,660 2,710,492
Intangible assets ................................................ -- --
Foreclosed real estate, net ...................................... -- --
Deferred & current income taxes .................................. (232,328) 116,739
Other assets ..................................................... 245,635 202,070
------------- -------------
TOTAL ASSETS ..................................................... $ 353,363,809 $ 346,041,302
============= =============
LIABILITIES
Deposits ......................................................... $ 303,595,038 $ 297,492,625
Borrowings ....................................................... 2,000,000 --
Advances from borrowers for taxes and insurance .................. 2,402,534 2,092,412
Accrued interest payable ......................................... 1,204,720 971,296
Other liabilities ................................................ 1,636,977 1,493,917
------------- -------------
TOTAL LIABILITIES ................................................ 310,839,269 302,050,250
------------- -------------
</TABLE>
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<TABLE>
<CAPTION>
HOME BANCORP
And wholly owned subsidiary
HOME LOAN BANK fsb
Fort Wayne, Indiana
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 (unaudited) and SEPTEMBER 30, 1997 (continued)
(unaudited)
March 31, 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, 2,357,584; 2,467,238 outstanding 34,208,451 33,985,413
Retained earnings, substantially restricted ...................... 28,899,920 27,618,839
Unearned ESOP compensation ....................................... (1,655,739) (1,769,379)
Unearned RRP compensation ........................................ (608,444) (714,294)
Treasury stock 1,022,941; 914,067 shares, at cost ................ (18,343,298) (15,180,548)
Net unrealized gain on securities available for sale ............. 23,650 51,021
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TOTAL STOCKHOLDERS' EQUITY ....................................... 42,524,540 43,991,052
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ......................... $ 353,363,809 $ 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 SIX MONTHS ENDED MARCH 31, 1998 AND March 31, 1997
(unaudited)
3 Months Ended: March 31, 6 Months Ended: March 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable ....................... $ 5,733,980 $ 5,015,720 $11,356,156 $ 9,986,641
Investment securities .................. 695,570 952,725 1,549,310 1,951,807
----------- ----------- ----------- -----------
Total interest income .................. 6,429,550 5,968,445 12,905,466 11,938,448
INTEREST EXPENSE
Deposits ............................... 3,984,262 3,608,685 8,106,214 7,228,130
Borrowings ............................. 3,893 -- 3,893 --
----------- ----------- ----------- -----------
Total interest expense ................. 3,988,155 3,608,685 8,110,107 7,228,130
Net interest income .................... 2,441,395 2,359,760 4,795,359 4,710,318
Provision for loan losses .............. 600 600 1,200 1,200
----------- ----------- ----------- -----------
Net interest income after provision .... 2,440,795 2,359,160 4,794,159 4,709,118
NON-INTEREST INCOME
Net gain-sale of interest earning assets 68,118 -- 104,888 --
Net gain-sale of real estate ........... -- -- -- --
Fees and service charges ............... 71,248 55,455 142,166 114,526
----------- ----------- ----------- -----------
Total non-interest income .............. 139,366 55,455 247,054 114,526
NON-INTEREST EXPENSE
Compensation & employee benefits ....... 782,525 655,517 1,532,793 1,361,232
Net occupancy & equipment .............. 144,799 140,657 289,555 284,145
FDIC insurance premiums ................ 46,852 10,342 92,195 162,679
Other general & administrative expenses 183,383 268,523 469,502 565,783
----------- ----------- ----------- -----------
Total non-interest expense ............. 1,157,559 1,075,039 2,384,045 2,373,839
Earnings before income tax ............. 1,422,602 1,339,576 2,657,168 2,449,805
Income tax expense ..................... 583,602 539,576 1,153,168 998,805
----------- ----------- ----------- -----------
NET INCOME ............................. $ 839,000 $ 800,000 $ 1,504,000 $ 1,451,000
=========== =========== =========== ===========
Earnings per share ..................... $ 0.38 $ 0.33 $ 0.68 $ 0.59
Earnings per share, assuming dilution .. $ 0.37 $ 0.32 $ 0.65 $ 0.58
</TABLE>
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<TABLE>
<CAPTION>
HOME BANCORP
Fort Wayne, Indiana
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
1998 1997
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income ................................................................ $ 1,504,000 $ 1,451,000
Adjustments to reconcile net income to net cash from operating activities
Depreciation ......................................................... 107,786 95,604
Provision for loan losses ............................................ 1,200 1,200
Gain on sale of securities ........................................... (104,888) --
Gain on sale of loans ................................................ -- --
Gain on sale of foreclosed real estate ............................... -- --
Loans originated for sale ............................................ -- --
Proceeds from loan sales ............................................. -- --
ESOP expense ......................................................... 365,024 171,608
Amortization of RRP contribution ..................................... 117,745 119,355
Loss on disposal of premises and equipment ........................... -- 770
Amortization of premiums and accretion of discounts, net ............. (76,434) (10,255)
Change in
Accrued interest receivable ........................................ 172,044 272,059
Other liabilities .................................................. 376,484 (1,687,673)
Other assets ....................................................... 468,861 (881,676)
------------ ------------
Net cash from operating activities .............................. 2,931,822 (468,008)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities held to maturity .............. 13,000,000 24,000,000
Proceeds investment securities ....................................... -- --
Proceeds from sales of securities available for sale ................. 6,199,024 --
Purchase of securities available for sale ............................ (3,985,125) --
Purchase of securities held to maturity .............................. -- (8,063,750)
Purchase of investment securities .................................... -- --
Purchase of Federal Home Loan Bank stock ............................. --
Net change in loans .................................................. (22,012,955) (10,468,533)
Purchase of premises and equipment ................................... (6,954) (264,163)
------------ ------------
Net cash from investing activities .............................. (6,806,010) 5,203,554
</TABLE>
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<TABLE>
<CAPTION>
HOME BANCORP
Fort Wayne, Indiana
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
(continued)
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Net change in deposit ................................................ 6,102,413 7,565,678
Borrowings from Federal Home Loan Bank ............................... 2,000,000 --
Increase in advance payments by borrowers for taxes and insurance .... 310,122 188,002
Purchase of treasury stock, net of reissuance of shares .............. (3,446,386) (2,518,371)
Cash dividends paid .................................................. (222,919) (265,468)
------------ ------------
Net cash provided by financing activities ....................... 4,743,230 4,969,841
Net change in cash and cash equivalents ................................... 869,042 9,705,387
Cash and cash equivalents, beginning of period ............................ 16,445,298 11,922,568
------------ ------------
Cash and cash equivalents, end of period .................................. $ 17,314,340 $ 21,627,955
============ ============
Supplemental disclosures of cash flow information
Cash paid for
Interest on deposits ............................................... $ 7,917,204 $ 7,202,383
Income taxes ....................................................... 790,000 957,976
</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 March 31, 1998 and for the interim periods
ended March 31, 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 $353.4 million as of March 31, 1998 compared to
$346.0 million as of September 30, 1997, an increase of $7.4 million. For the
same period, equity decreased from $44.0 million as of September 30, 1997 to
$42.5 million as of March 31,1998. The modest growth in total assets and the net
decrease in equity for the period ended March 31, 1998 was primarily the result
of the repurchase of 127,942 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 $3.4 million.
Loans receivable increased $22.0 million, primarily from 1-4 family residential
originations, from $284.0 million at September 30, 1997 to $306.0 million at
March 31, 1998. Deposits increased $6.1 million for the six months ended March
31, 1998 from $297.5 million as of September 30, 1997 to $303.6 million as of
March 31, 1998.
Cash and cash equivalents increased from $16.4 million as of September 30, 1997
to $17.3 million as of March 31, 1998, an increase of approximately $0.9
million. Investment securities available for sale decreased $2.0 million to $9.1
million for the six month period ended March 31,1998 while securities held to
maturity decreased $13.0 million, from $27.0 million as of September 30, 1997 to
$14.0 million as of March 31, 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.
Income taxes, current and deferred, as of March 31, 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 March 31, 1998, the Company borrowed $2.0 million at a
fixed rate for a ten year term with principal at maturity from the Federal Home
Loan Bank on a Community Investment Program advance. The funds are being used to
fund home financing for low and moderate income customers in the Company's
service area.
Advances from borrowers for taxes and insurance increased from $2.1 million as
of September 30, 1997 to $2.4 million as of March 31, 1998 primarily from the
timing of semi-annual payments of real estate taxes and annual insurance
premiums on behalf of loan customers.
Accrued interest payable increased by approximately $233,000 during the six
month period ended March 31, 1998 to $1.2 million primarily from the increased
balances of interest bearing deposits and accrued interest on borrowings.
<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 March 31, 1998 increased by
$39,000, or 4.9%, to $839,000 from $800,000 for the same period ended March 31,
1997. For the six months ended March 31, 1998, net income was $1,504,000, an
increase of $53,000, or 3.7%, 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 provisions for tax liabilities.
The three month earnings represent an annualized return on average assets (ROA)
of 0.96% and a return on average equity (ROE) of 7.09%. For the six month period
ended March 31, 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 six month periods ended
March 31, 1998 increased by approximately $82,000 and $85,000, respectively,
compared to the same periods in 1997. These increases were primarily the result
of increased balances of the Company's interest-earning assets and improving
yields on those assets.
Total interest income at March 31, 1998 increased by approximately $460,000 for
the three month period, and approximately $970,000 for the six month period when
compared with the results for the same periods ended March 31, 1997. The yield
on interest-earning assets increased in the three and six month periods ended
March 31, 1998 to 7.47% and 7.51%, respectively, compared to 7.44% and 7.42% for
the same periods in the preceding year. These increasing yields were attributed
to increases in outstanding loan balances funded by lower yielding investments.
The improved yields on earning assets were enhanced by marginally lower costs
for deposits during the three month period, and were nearly offset by higher
funding costs in the six month period ended March 31, 1998 when compared to
comparable periods in 1997. For the three months ended March 31, 1998, the
average cost of interest-bearing liabilities was 5.26% compared to 5.31% for the
like period in 1997. For the six months ended March 31, 1998, the average cost
of interest-bearing liabilities was 5.37% compared to 5.28% 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 six 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
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.
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
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 March 31, 1998 and $1,200
for the six month period ended that date. There were no changes in either period
from the prior year periods ended March 31, 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 March 31, 1998, the Company's allowance for loan losses
totaled $1.4 million or .45% of net loans receivable and 462% 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 $84,000 for the three month period ended March 31, 1998 in
comparison to the like period in 1997. For the six month period ended March 31,
1998, non-interest income increased by approximately $133,000 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 for the three and six month periods ended March
31, 1998, increased approximately $16,000 and $28,000, respectively, over
results experienced in 1997. These increases were from increased customer
service related fees and/or bank imposed charges.
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
Non-Interest Expense. Non-interest expenses for the three and six month periods
ended March 31, 1998, were approximately $1,158,000 and $2,384,000,
respectively, compared to $1,075,000 and $2,374,000 reported from the same prior
year periods. For the periods ended March 31, 1998, compensation and employee
benefits increased approximately $127,000 and $172,000 for the respective three
and six month periods as compared to 1997. These increases were primarily
attributed 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 increased by approximately $37,000 in the three month period
ended March 31, 1998, but decreased by approximately $70,000 in the six month
period when compared to 1997. This fluctuation was the result of credits
received in the first quarter of 1997 from the FDIC for overcharges from the
recapitalization of the insurance fund on September 30, 1996. Other general and
administrative expenses were approximately $85,000 and $96,000 lower for the
respective three and six month periods ended March 31, 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 three month and six month periods
ended March 31, 1998 increased by approximately $44,000 and $154,000
respectively, over like periods in 1997 primarily from higher pretax earnings
during the periods.
<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 Six Months Ended
March 31, March 31,
FINANCIAL HIGHLIGHTS (Averages) 1998 1997 1998 1997
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Return on assets ...................................... 0.96% 0.98% 0.86% 0.89%
Return on equity ...................................... 7.09% 7.03% 7.01% 6.33%
Yield on interest-earning assets ...................... 7.47% 7.44% 7.51% 7.42%
Cost of interest-bearing liabilities .................. 5.26% 5.31% 5.37% 5.28%
Net interest spread ................................... 2.21% 2.13% 2.14% 2.14%
Net interest rate margin .............................. 2.79% 2.90% 2.74% 2.90%
Net interest income to operating (G&A) expenses ....... 210.54% 219.50% 200.98% 198.43%
Operating (G&A) expenses to assets .................... 1.32% 1.32% 1.36% 1.46%
Non-interest income to assets ......................... 0.16% 0.07% 0.16% 0.07%
Interest-earning assets to interest-bearing liabilities 113.71% 115.19% 113.79% 115.61%
Efficiency ratio ...................................... 44.94% 44.51% 47.32% 49.20%
Equity to assets ...................................... 12.11% 13.98% 12.26% 14.11%
Tangible equity to assets ............................. 12.11% 13.98% 12.26% 14.11%
Average assets (dollars in thousands) ................. $ 350,682 $ 325,864 $ 350,104 $ 324,818
ASSET QUALITY RATIOS
Non-performing assets to total assets ................. 0.09% 0.09%
Non-performing loans to net loans ..................... 0.10% 0.11%
Allowance for loan losses to net loans ................ 0.45% 0.53%
Allowance for loan losses to non-performing loans ..... 462% 468%
Net charge offs to loans .............................. -- --
Loans to deposits ..................................... 100.79% 93.55%
Loans to assets ....................................... 86.60% 79.56%
PER COMMON SHARE
Net income ............................................ $ 0.38 $ 0.33 $ 0.68 $ 0.59
Net income (diluted) .................................. $ 0.37 $ 0.32 $ 0.65 $ 0.58
Book value ............................................ $ 18.04 $ 17.43
Tangible book value ................................... $ 18.04 $ 17.43
STOCK PRICE
High .................................................. $ 37.875 $ 21.25
Low ................................................... $ 28.500 $ 19.00
Close ................................................. $ 33.563 $ 20.38
</TABLE>
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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 March 31, 1998, the Bank had $2.0 million in advances from the
FHLB of Indianapolis as part of a specific community lending program. Prior to
this advance and exclusive of the ESOP, the Bank had not had any advances or
other borrowings outstanding since 1983.
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 March 31, 1998, the Bank's liquidity ratio was 12.5%. 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 March 31, 1998, the Bank had outstanding commitments to extend credit
which amounted to $21.5 million (including $11.6 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 March 31, 1998, the Bank's capital totaled $33.7
million, or 9.72% of tangible and core capital. Risk-based capital totaled $35.1
million, or represented 20.11% 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 software 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 most notable area identified is relative to the replacement of older
computer hardware that will not be Year 2000 compliant, but had been previously
identified and scheduled for replacement over the next nine month period. The
Company is currently soliciting bids for the replacement of that hardware and
supporting software.
The Company is also requiring 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, and has
planned a program for testing of compliance. The financial impact to the Company
and its financial position or results of operations beyond the disclosed
purchase of certain equipment may not be reasonably estimated as of March 31,
1998.
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 March 31, 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.
<TABLE>
<CAPTION>
At March 31, 1998
- -----------------------------------------------------------------
Change in Interest Rate Board Limit $ Change % Change
(Basis Points) % Change (In Thousands)
<S> <C> <C> <C>
+300 bp (27) ($18,095) (46)
+200 bp (20) ($11,508) (29)
+100 bp (12) ($ 5,204) (13)
0 bp - - -
-100 bp ( 9) $ 2,584 7
-200 bp (12) $ 529 1
-300 bp (19) ($ 3,032) ( 8)
</TABLE>
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 2 Continued
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
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, not previously reported on Form 10-Q for the quarter ended
December 31, 1997
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 March 31, 1998 and
subsequent to that date include:
Date of Report Subject
-------------- -------
4-22-98 Press Release relative to Second Quarter 1998
Earnings and Declaration of Cash Dividend
<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: May 8, 1998 /s/ W. Paul Wolf
----------------
W. Paul Wolf
Chairman, President, CEO
Date: May 8, 1998 /s/ Matthew P. Forrester
------------------------
Matthew P. Forrester
Vice President, Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,457
<INT-BEARING-DEPOSITS> 13,257
<FED-FUNDS-SOLD> 2,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,088
<INVESTMENTS-CARRYING> 14,013
<INVESTMENTS-MARKET> 14,177
<LOANS> 305,999
<ALLOWANCE> 1,389
<TOTAL-ASSETS> 353,364
<DEPOSITS> 303,595
<SHORT-TERM> 2,000
<LIABILITIES-OTHER> 5,244
<LONG-TERM> 0
0
0
<COMMON> 34,208
<OTHER-SE> 8,316
<TOTAL-LIABILITIES-AND-EQUITY> 353,364
<INTEREST-LOAN> 11,356
<INTEREST-INVEST> 1,549
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 12,905
<INTEREST-DEPOSIT> 8,106
<INTEREST-EXPENSE> 4
<INTEREST-INCOME-NET> 4,795
<LOAN-LOSSES> 1
<SECURITIES-GAINS> 105
<EXPENSE-OTHER> 2,384
<INCOME-PRETAX> 2,657
<INCOME-PRE-EXTRAORDINARY> 2,657
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,504
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.65
<YIELD-ACTUAL> 7.51
<LOANS-NON> 0
<LOANS-PAST> 300
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,388
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,389
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,389
</TABLE>
