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
-------------------------------------------
For Quarter Ended Commission File Number
March 31, 1999 0-22376
HOME BANCORP
------------------------------------------------------------
(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 March 31, 1999, there were 3,380,315 shares of common stock issued and
2,175,768 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, 1999
and September 30, 1998
Consolidated Statements of Income for the three months
and six months ended March 31, 1999, and 1998
Consolidated Statements of Cash Flow for the
six months ended March 31, 1999, and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 3. Quantitative and Qualitative Disclosures about
Market Risk
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 March 31, 1999 (unaudited) and SEPTEMBER 30, 1998
(unaudited)
ASSETS March 31, 1999 September 30, 1998
-------------- --------------
<S> <C> <C>
Cash on hand and in other banks ........................... $ 1,825,353 $ 1,643,168
Interest earning deposits in other banks .................. 12,911,441 11,722,658
Federal funds sold ........................................ 9,200,000 10,000,000
------------- -------------
Cash and cash equivalents ................................. 23,936,794 23,365,826
Investment securities available for sale .................. 25,421,875 5,137,187
Investment securities held to maturity
(Market value $0; $12,195,000) ....................... -- 12,024,247
Loans receivable, net
(Allowance for loan losses $1,391,589; $1,390,389) ... 339,163,258 324,187,601
Federal Home Loan Bank stock .............................. 2,782,500 2,782,500
Accrued interest receivable ............................... 2,050,507 1,948,771
Bank premises & equipment ................................. 2,904,573 2,804,550
Intangible assets ......................................... -- --
Foreclosed real estate, net ............................... 58,908 --
Other assets .............................................. 269,443 178,303
------------- -------------
TOTAL ASSETS .............................................. $ 396,587,858 $ 372,428,985
============= =============
LIABILITIES
Deposits .................................................. $ 343,580,187 $ 315,998,104
Federal Home Loan Bank advances ........................... 7,000,000 9,000,000
Advances from borrowers for taxes and insurance ........... 3,210,217 2,597,387
Accrued interest payable .................................. 974,440 1,117,518
Other liabilities ......................................... 1,721,011 2,677,697
------------- -------------
TOTAL LIABILITIES ......................................... 356,485,855 331,390,706
------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
And wholly owned subsidiary
HOME LOAN BANK fsb
Fort Wayne, Indiana
CONSOLIDATED BALANCE SHEETS
AS OF March 31, 1999 (unaudited) and SEPTEMBER 30, 1998
(continued)
STOCKHOLDERS' EQUITY
<S> <C> <C>
Preferred stock, no par value, 5,000,000 shares authorized,
none issued .......................................... -- --
Common stock, no par value, 10,000,000 shares authorized,
3,380,315 issued, 2,175,768; 2,254,642 outstanding ... 34,690,943 34,399,135
Retained earnings, substantially restricted ............... 31,018,208 29,851,665
Unearned ESOP compensation ................................ (1,414,606) (1,536,908)
Unearned RRP compensation ................................. (349,598) (466,131)
Treasury stock 1,204,547; 1,125,673 shares, at cost ....... (23,888,692) (21,273,755)
Net unrealized gain on securities available for sale ...... 45,748 64,273
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TOTAL STOCKHOLDERS' EQUITY ................................ 40,102,003 41,038,279
------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY .................. $ 396,587,858 $ 372,428,985
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
And wholly owned subsidiary
HOME LOAN BANK fsb
Fort Wayne, Indiana
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE AND SIX MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
(unaudited)
3 Months Ended: March 31, 6 Months Ended March 31,
--------------------------- ----------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable ....................................................... $ 6,147,852 $ 5,733,980 $ 12,244,105 $ 11,356,156
Investment securities .................................................. 570,251 695,570 1,127,129 1,549,310
------------ ------------ ------------ ------------
Total interest income .................................................. 6,718,103 6,429,550 13,371,234 12,905,466
INTEREST EXPENSE
Deposits ............................................................... 4,167,135 3,984,262 8,314,896 8,106,214
Advances ............................................................... 92,200 3,893 194,802 3,893
------------ ------------ ------------ ------------
Total interest expense ................................................. 4,259,335 3,988,155 8,509,698 8,110,107
Net interest income .................................................... 2,458,768 2,441,395 4,861,536 4,795,359
Provision for loan losses .............................................. 600 600 1,200 1,200
------------ ------------ ------------ ------------
Net interest income after provision .................................... 2,458,168 2,440,795 4,860,336 4,794,159
NON-INTEREST INCOME
Net gain-sale of interest earning assets ............................... 65,492 68,118 90,107 104,888
Net gain-sale of real estate ........................................... -- -- -- --
Fees and service charges ............................................... 82,159 71,248 171,145 142,166
------------ ------------ ------------ ------------
Total non-interest income .............................................. 147,651 139,366 261,252 247,054
NON-INTEREST EXPENSE
Compensation & employee benefits ....................................... 787,187 782,525 1,555,461 1,532,793
Net occupancy & equipment .............................................. 215,182 144,799 388,516 289,555
FDIC insurance premiums ................................................ 48,462 46,852 93,044 92,195
Other general & administrative expenses ................................ 231,730 183,383 417,830 469,502
------------ ------------ ------------ ------------
Total non-interest expense ............................................. 1,282,561 1,157,559 2,454,851 2,384,045
Earnings before income tax ............................................. 1,323,258 1,422,602 2,666,737 2,657,168
Income tax expense ..................................................... 534,258 583,602 1,112,737 1,153,168
------------ ------------ ------------ ------------
NET INCOME ............................................................. $ 789,000 $ 839,000 $ 1,554,000 $ 1,504,000
------------ ------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
And wholly owned subsidiary
HOME LOAN BANK fsb
Fort Wayne, Indiana
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE AND SIX MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
(unaudited) (continued)
<S> <C> <C> <C> <C>
Other comprehensive income
Net unrealized gains (losses) on securities available for sale
Unrealized losses arising during the period ......................... 80,568 34,813 60,034 63,417
Reclassification adjustment for realized gains included in net income (65,492) (68,118) (88,102) (104,888)
------------ ------------ ------------ ------------
Net unrealized losses on securities available for sale .......... 15,076 (33,305) (28,068) (41,471)
Tax effect ............................................................. (5,125) 10,004 9,543 14,100
------------ ------------ ------------ ------------
Total other comprehensive income (loss) ........................... 9,950 (23,301) (18,525) (27,371)
Comprehensive income ................................................... $ 798,950 $ 815,699 $ 1,535,475 $ 1,476,629
============ ============ ============ ------------
Earnings per share, basic .............................................. $ 0.39 $ 0.38 $ 0.76 $ 0.68
Earnings per share, assuming dilution .................................. $ 0.37 $ 0.37 $ 0.74 $ 0.65
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
Fort Wayne, Indiana
STATEMENTS OF CASH FLOW
SIX MONTHS ENDED MARCH 31, 1999, AND 1998
(unaudited)
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income ..................................................................... $ 1,554,000 $ 1,504,000
Adjustments to reconcile net income to net cash from operating activities
Depreciation .............................................................. 172,479 107,786
Provision for loan losses ................................................. 1,200 1,200
Gain on sale of securities ................................................ (88,102) (104,888)
Gain on sale of loans ..................................................... (2,005) --
Gain on sale of foreclosed real estate .................................... -- --
Loans originated for sale ................................................. -- --
Proceeds from loan sales .................................................. 87,114 --
ESOP expense .............................................................. 305,525 365,024
Amortization of RRP contribution .......................................... 116,533 117,745
Loss on disposal of premises and equipment ................................ -- --
Amortization of premiums and accretion of discounts, net .................. (30,611) (76,434)
Change in
Accrued interest receivable ............................................. (101,786) 172,044
Other liabilities ....................................................... (1,099,764) 376,484
Other assets ............................................................ 139,866 468,861
------------ ------------
Net cash from operating activities ................................... 1,054,449 2,931,822
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from maturities of securities held to maturity ................... 4,000,000 13,000,000
Proceeds from sales of securities available for sale ...................... 6,054,261 6,199,024
Purchase of securities available for sale ................................. (18,345,313) (3,985,125)
Purchase of securities held to maturity ................................... -- --
Purchase of Federal Home Loan Bank stock .................................. -- --
Net change in loans ....................................................... (15,120,874) (22,012,955)
Purchase of premises and equipment ........................................ (272,502) (6,954)
------------ ------------
Net cash from investing activities ................................... (23,684,428) (6,806,010)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
Fort Wayne, Indiana
STATEMENTS OF CASH FLOW
SIX MONTHS ENDED MARCH 31, 1999, AND 1998
(unaudited)
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Net change in deposit ..................................................... 27,582,083 6,102,413
Advances from Federal Home Loan Bank ...................................... (2,000,000) 2,000,000
Increase in advance payments by borrowers for taxes and insurance ......... 612,830 310,122
Purchase of treasury stock, net of reissuance of shares ................... (3,169,596) (3,446,386)
Cash dividends paid ....................................................... (392,920) (222,919)
Proceeds from exercise of stock options ................................... 568,550 --
------------ ------------
Net cash provided by financing activities ............................ 23,200,947 4,743,230
Net change in cash and cash equivalents ........................................ 570,968 869,042
Cash and cash equivalents, beginning of period ................................. 23,365,826 16,445,298
------------ ------------
Cash and cash equivalents, end of period ....................................... $ 23,936,794 $ 17,314,340
============ ============
Supplemental disclosures of cash flow information
Cash paid for
Interest ................................................................ $ 8,652,776 $ 7,917,204
Income taxes ............................................................ 1,171,302 790,000
Supplemental schedule of non-cash investing and financing activities
Investment securities held to maturity transferred to investment securities
available for sale ............................................................. $ 8,024,247 --
Loans transferred to foreclosed real estate ............................... 58,908 --
Loans transferred to loans held for sale .................................. 85,109 --
</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, 1999 and for the interim periods
ended March 31, 1999, and 1998 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. 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. 130, "Reporting Comprehensive Income." Comprehensive income
consists of net income and other comprehensive income. Other comprehensive
income includes the net change in unrealized appreciation (depreciation) on
securities available for sale, net of tax which is also recognized as a separate
component of shareholders' equity. The accounting standard that requires
reporting comprehensive income first applied as of October 1, 1998, with prior
information restated to be comparable.
2) SFAS No. 131, "Disclosures About Segments of Enterprises", redefines
segment reporting to follow how each company's chief operating decision maker
gets information about business segments to make operating decisions. This
statement is not applicable to the Company as it does not have multiple business
segments.
3) SFAS No. 132, "Employers Disclosures About Pensions and Other
Postretirement Benefits", increases and revises pension plan and other
postretirement benefit plan disclosures for public companies, and simplifies
such disclosures for public companies, and simplifies such disclosures for
nonpublic companies. These revised disclosures will be incorporated into the
Company's annual filings.
<PAGE>
Home Bancorp
Fort Wayne, IN
Notes to Consolidated Financial Statements
(Unaudited)
Item 1
4) SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", requires all derivatives to be recognized at fair value as either
assets or liabilities in the Consolidated Balance Sheets for fiscal years
beginning after June 15, 1999. Changes in fair value of derivatives not
designated as hedging instruments are either to be recognized currently in
earnings or are to be recognized as a component of other comprehensive income,
depending on the intended use of the derivatives and the resulting designations.
Another provision of the statement allows for a reallocation of securities from
held to maturity to available for sale. The Company choose early adoption of
this new standard as of January 1, 1999. Its adoption has no material impact on
its consolidated financial position or results of operations.
C. 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.
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.
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
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.
Forward-Looking Statements
The Company and the Bank may from time to time make written or oral
"forward-looking statements", including statements contained in this Form 10-Q
or future filings with the Securities and Exchange Commission (including
Exhibits thereto), in its reports to shareholders and in other communications by
the Company, which are made in good faith by the Company and the Bank pursuant
to the "safe harbor" provisions of the Private Securities Litigation Reform Act
of 1995.
These forward-looking statements include statements with respect to
the Company's and the Bank's beliefs, plans, objectives, goals, expectations,
anticipations, estimates and intentions, that are subject to significant risks
and uncertainties, and are subject to change based on various factors (some of
which are beyond the Company's and Bank's control). The words "may", "could",
"should", "would", "believe", "anticipate", "estimate", "expect", "intend",
"plan" and similar expressions are intended to identify forward-looking
statements. The following factors, among others, could cause the Company's and
the Bank's financial performance to differ materially from the plans,
objectives, expectations, estimates and intentions expressed in such
forward-looking statement: the strength of the United States economy in general
and the strength of the local economies in which the Company and Bank conduct
operations; the effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Federal Reserve Board;
inflation, interest rate, market and monetary fluctuations; the timely
development of and acceptance of new products and services of the Bank and the
perceived overall value of thee products and services; the willingness of users
to substitute competitors' products and services for the Bank's products and
services, when required; the impact of changes in financial services' laws and
regulations (including laws concerning taxes, banking, securities and
insurance); technological changes; acquisitions; changes in consumer spending
and saving habits; and the success of the Company and the Bank at managing risks
involved in the foregoing.
The foregoing list of important factors is not exclusive. The Company
does not undertake to update any forward-looking statement, whether written or
oral, that may be made from time to time by or on behalf of the Company or the
Bank.
<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 $396.6 million as of March 31, 1999 compared to
$372.4 million as of September 30, 1998, an increase of $24.2 million. For the
same period, equity decreased from $41.0 million as of September 30, 1998 to
$40.1 million as of March 31, 1999. The increase in total assets was the result
of continued growth in the Company's loan and investment securities funded by
deposit growth. The modest decrease in equity for the period ended March 31,
1999 was primarily the result of the repurchase of 116,156 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 $3.2 million.
Loans receivable increased $15.0 million, primarily from 1-4 family residential
originations, from $324.2 million at September 30, 1998 to $339.2 million at
March 31, 1999. Deposits increased $27.6 million for the six month period,
increasing from $316.0 million as of September 30, 1998 to $343.6 million as of
March 31, 1999.
Cash and cash equivalents increased from $23.4 million as of September 30, 1998
to $23.9 million as of March 31, 1999. On January 1, 1999 the Company adopted
FASB No. 133 and reclassified all of its securities as available for sale. As of
March 31, 1999, securities available for sale totaled $25.4 million, an increase
of $8.3 million, from the aggregate of investment securities held September 30,
1998. During the six month period ended March 31, 1999, in addition to the
maturity and sale of securities to fund continued loan growth and the repurchase
program, the Company purchased a total of $18.3 million in securities held as
available for sale.
As of March 31, 1999 the Company held two residential properties in the amount
of approximately $59,000 as real estate owned. As of September 30, 1998 the
Company held no repossessed assets.
The balance in Federal Home Loan Bank advances decreased $2.0 million during the
six month period ended March 31, 1999 from the repayment of a maturing advance.
Deposit growth during the period financed continued loan portfolio growth,
enhanced the Company's liquidity position, and allowed the repayment of the
advance without further borrowings.
Advances from borrowers for taxes and insurance increased from $2.6 million as
of September 30, 1998 to $3.2 million as of March 31, 1999 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
Financial Condition and Results of Operation
Item 2 Continued
Results of Operation
General. Net income for the three months ended March 31, 1999 decreased by
$50,000, or 6.0%, to $789,000 from $839,000 for the same period ended March 31,
1998. The decrease was attributed to an increase in non-interest expense for the
like periods. For the six months ended March 31, 1999, net income was
$1,554,000, an increase of $50,000, or 3.3%, from the comparable prior year
period. The six month increase is attributed to higher net interest income and
non-interest income that was partially offset by higher non-interest expenses.
The three month earnings represent an annualized return on average assets (ROA)
of 0.81% and a return on average equity (ROE) of 7.86%. For the six month period
ended March 31, 1999, earnings represent an annualized ROA of 0.81% and a ROE of
7.72%.
Net Interest Income. The Company's net income is primarily dependent upon net
interest income. Net interest income for the three and six month period ended
March 31, 1999 increased by approximately $17,000 and $66,000, respectively,
compared to the same periods in 1998. This increase was primarily the net result
of relatively stable interest rate spreads earned on higher interest earning
balances.
Total interest income at March 31, 1999 increased by approximately $289,000 for
the three month period, and approximately $466,000 for the six month period when
compared with the results for the same periods ended March 31, 19998.The yield
on interest-earning assets decreased in the three and six month periods ended
March 31, 1999 to 7.02% and 7.14%, respectively, compared to 7.47% and 7.51% for
the same periods in the preceding year. These decreasing yields are attributed
to general decreases in market interest rates on loans and investments.
The growth in total interest income was significantly negated by increased
interest expense during the three and six month periods ended March 31, 1999.
Interest expense increased by approximately $271,000 for the three month period,
and approximately $400,000 for the six month period in comparison to like
periods in 1998. These increases were the result of increased balances of
costing-liabilities as average funding costs decreased in both periods from the
prior year results. For the three and six month periods ended March 31, 1999,
the average cost of interest-bearing liabilities was 4.96% and 5.07%,
respectively, down from 5.26% and 5.37% for the same periods in 1998. The
Company's average costs of funds continue to be higher than those experienced by
national peers, primarily from 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 and $1,200 for the six months
ended March 31, 1999, the same amount for the like periods in 1998.
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, 1999, the Company's allowance for loan losses
totaled $1.4 million or .41% of net loans receivable and 344% 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 $8,000 for the three month period and approximately $14,000 for
the six month period ended March 31, 1999 in comparison to the like periods in
1998. These increases were attributed primarily to increases in customer service
related fees and/or bank imposed charges. These increases were partially offset
by by decreases from the prior year periods in gains realized on the sale of
securities available for sale.
Non-Interest Expense. Non-interest expenses for the three and six month periods
ended March 31, 1999 were approximately $1,283,000 and $2,455,000, respectively,
compared to $1,158,000 and $2,384,000 reported from the same prior year periods
in 1998. For the periods ended March 31, 1999, net occupancy and equipment
expense is up from the prior year approximately $70,000 for the three month
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
period and $99,000 for the six months. Those increases are generally the result
of depreciation expenses on new data processing equipment placed in service
during the first quarter of fiscal 1999 and increases in associated data
processing costs from technological upgrades to those systems. Other general and
administrative expenses were approximately $48,000 higher for the three month
period ended March 31, 1999 than for the same period a year earlier. For the six
month those expenses were approximately $52,000 lower than a year earlier. These
changes are attributed primarily to fluctuations in the number and timing of
loan originations where applied costs are reduce by associated income. During
the fiscal 1999 periods, the Company has contained to be effective in its cost
containment efforts despite significant asset growth.
Income Tax Expense. Income tax expense for the three month period ended March
31, 1999 reflect lower pretax earnings than in the previous like year period.
For the comparative six month periods, fiscal 1999 tax provisions are modestly
lower due to higher non-income deductions than for the previous like year
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 Six Months Ended
March 31, March 31,
FINANCIAL HIGHLIGHTS (Averages) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Return on assets............................. 0.81% 0.96% 0.81% 0.86%
Return on equity............................. 7.86% 7.09% 7.72% 7.01%
Yield on interest-earning assets............. 7.02% 7.47% 7.14% 7.51%
Cost of interest-bearing liabilities......... 4.96% 5.26% 5.07% 5.37%
Net interest spread.......................... 2.06% 2.21% 2.07% 2.14%
Net interest rate margin..................... 2.52% 2.79% 2.55% 2.74%
Net interest income to operating (G&A)
expenses..................................... 191.71% 210.54% 197.99% 200.98%
Operating (G&A) expenses to assets........... 1.32% 1.32% 1.29% 1.36%
Non-interest income to assets................ 0.15% 0.16% 0.14% 0.16%
Interest-earning assets to interest-bearing
liabilities.................................. 111.36% 113.71% 111.73% 113.79%
Efficiency ratio............................. 49.21% 44.94% 48.80% 47.32%
Equity to assets (at end of period).......... 10.11% 12.03% 10.11% 12.03%
Tangible equity to assets (at end of period). 10.11% 12.03% 10.11% 12.03%
Average assets (dollars in thousands)........ $389,707 $350,682 $381,497 $350,104
ASSET QUALITY RATIOS
Non-performing assets to total assets........ 0.10% 0.09%
Non-performing loans to net loans............ 0.12% 0.10%
Allowance for loan losses to net loans....... 0.41% 0.45%
Allowance for loan losses to non-performing
loans........................................ 344% 462%
Net charge offs to loans..................... ---- ----
Loans to deposits............................ 98.71% 100.79%
Loans to assets.............................. 85.52% 86.60%
PER COMMON SHARE
Net income................................... $ 0.39 $ 0.38 $ 0.76 $ 0.68
Net income (diluted)......................... 0.37 0.37 0.72 0.65
Book value................................... 18.43 18.04
Tangible book value.......................... 18.43 18.04
STOCK PRICE
High......................................... $ 33.500 $37.875
Low.......................................... 27.500 28.500
Close........................................ 33.563
</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 March 31, 1999, 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 March 31, 1999, the Bank's quarterly liquidity ratio was
12.4%. As of March 31, 1998, the Bank's liquidity was 12.5%.
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, 1999 the Bank had outstanding commitments to extend credit
which amounted to $23.6 million (including $12.9 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, 1999, the Bank's capital totaled $34.4
million, or 8.77% of tangible and core capital. Risk-based capital totaled $35.0
million, or represented 18.51% of risk-based assets. The institution
substantially exceeded all regulatory capital standards.
The Year 2000 Issue
General. Like most financial institutions, the Bank and its operations may be
significantly affected by the Y2K issue due to its dependency on technology and
date-sensitive data. Computer software and hardware and other equipment, both
within and outside the Bank's direct control, including the Bank's dependency on
data processing capabilities from NCR Corporation and other third parties with
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
whom the Bank electronically or operationally interfaces may be affected. If
computer systems are not modified and tested properly to process the year 2000,
many computer applications could fail or create erroneous results. As a result,
many calculations which rely on date filled information, such as interest,
payment or due dates and other operating functions, could generate results which
are significantly misstated, and the Bank could experience an inability to
process transactions, prepare statements or engage in similar normal business
activities. Thus if not adequately addressed, the Y2K issue could have an
adverse impact on the Bank's operations and, in turn, its financial condition
and results of operations.
Systematic Review. Financial institution regulators have placed significant
emphasis upon Y2K compliance issues and have issued guidance concerning the
responsibilities of senior management and directors. The federal bank regulatory
agencies have stressed the adoption of specific steps to achieve Y2K compliance.
The Federal Financial Institutions Examination Council (the "FFIEC"), of which
the Office of Thrift Supervision is a member, has designed an outline for
institutions to use in effectively managing the Y2K challenge. The following
summarize the Bank's progress to date as illustrated by the FFIEC specified
phases:
Awareness Phase. The Bank established a formal Y2K plan headed by an executive
officer, and a project team for the management of the issue. A plan of action
was developed with the support of the Board of Directors that included
milestones, budget estimates, strategies, and methodologies to track and report
the status of the project.
This phase is substantially complete.
Assessment Phase. The Bank's strategies were further developed with respect to
how the objectives of the Y2K plan would be achieved, and a business risk
assessment was made to quantify the extent of the Bank's Y2K exposure. A
corporation inventory was developed to identify and monitor readiness for
information systems (hardware, software, utilities and vendors) as well as
environmental systems. Systems were prioritized based upon business impact and
available alternatives. A formal plan was developed to replace, repair, or
upgrade all mission critical systems. This phase is substantially complete.
Because the Bank's loan portfolio is primarily residential real estate based and
is diversified with individual borrowers, and the Bank's primary market area is
not significantly dependent on one employer or industry, the Bank does not
expect any significant or prolonged Y2K related difficulties that will affect
net earnings or cash flow. As part of the current credit approval process, all
residential loan applications over $300,000 by self-employed individuals are
evaluated for Y2K risk as are all commercial loan applications.
Renovation Phase. In recognition of potential Y2K problems, the Bank delayed
significant hardware and software purchases until this fiscal year. The Bank has
replaced or renovated virtually all of its hardware systems and updated or
<PAGE>
Home Bancorp
Fort Wayne, IN
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Item 2 Continued
replaced most of its software systems. Y2K compliant equipment and software has
been delivered and placed into production and is either in the validation or
implementation phase of the plan. The Bank has invested approximately $500,000
in new computers, communication, and software purchases. Approximately, $140,000
in charges associated with Y2K were also expensed as non-recurring charges
during the 1998 fiscal year.
Validation and Implementation Phases. These phases are designed to test the
ability of the systems to accurately process date sensitive data. The Bank has
completed or is in the process of validating all of the its mission critical
applications. These phases with only minor exceptions were completed by March
31, 1999.
Continency Plans. The Bank has also developed a plan that recognizes that
certain contingencies may undermine preparations to date. The plan addresses the
viability of certain processes, including data and information processing, that
could be threatened by circumstances beyond the Bank's direct or even
recognizable control. The Bank's contingency plan attempts to provide thoughtful
analysis of issues and circumstances, and provide substantive plans of action in
the event of system failures.
Quantitative and Qualitative Discolosures about
Market Risk
Item 3
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
Quantitative and Qualitative Discolosures about
Market Risk
Item 3 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, 1999, 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, 1999
- -------------------------------------------------------------------------------------------
Change in Interest Rate Board Limit $ Change % Change
(Basis Points) % Change (In Thousands)
<S> <C> <C> <C>
+300 bp (45) ($19,866) (54)
<S> <C> <C> <C> <C>
+200 bp (29) ( 12,397) (-34)
+100 bp (13) ( 5,411) (15)
0 bp - - -
-100 bp ( 2) 2,783 8
-200 bp ( 6) 3,680 10
-300 bp (10) 4,700 13
</TABLE>
<PAGE>
Home Bancorp
Fort Wayne, IN
Quantitative and Qualitative Discolosures about
Market Risk
Item 3 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, interest rates on certain assets and
liabilities may fluctuate in 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 that were not previously reported in the 10-Q file for the quarter
ended December 31, 1998.
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
Press release filed on Form 8-K during the quarter ended March 31, 1999
and subsequent to that date include:
Date of Report Subject
-------------- -------
3-17-98 Registrant's Press Release for Declared Cash Dividend
4-28-99 Registrant's Press Release Relative to Second Quarter
And Fiscal Year to Date 1999 Earnings
5-04-99 Registrant's Press Release Relative to the Establishment of
the Subsidiary's 10th Office
<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 13, 1999 /s/ W. Paul Wolf
----------------
W. Paul Wolf
Chairman, President, CEO
Date: May 13, 1999 /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-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,825
<INT-BEARING-DEPOSITS> 12,911
<FED-FUNDS-SOLD> 9,200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25,422
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 25,422
<LOANS> 339,163
<ALLOWANCE> 1,392
<TOTAL-ASSETS> 396,588
<DEPOSITS> 383,580
<SHORT-TERM> 7,000
<LIABILITIES-OTHER> 5,906
<LONG-TERM> 0
0
0
<COMMON> 34,691
<OTHER-SE> 5,141
<TOTAL-LIABILITIES-AND-EQUITY> 396,588
<INTEREST-LOAN> 12,244
<INTEREST-INVEST> 1,127
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 13,371
<INTEREST-DEPOSIT> 8,315
<INTEREST-EXPENSE> 8,510
<INTEREST-INCOME-NET> 4,862
<LOAN-LOSSES> 1
<SECURITIES-GAINS> 90
<EXPENSE-OTHER> 2,455
<INCOME-PRETAX> 2,667
<INCOME-PRE-EXTRAORDINARY> 1,554
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,554
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.74
<YIELD-ACTUAL> 7.14
<LOANS-NON> 0
<LOANS-PAST> 405
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,391
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,392
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,392
</TABLE>
