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 March 31, 2000
Commission File Number 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 December 31, 1999, there were 3,378,868 shares of common stock issued and
1,996,124 shares outstanding.
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
FORM 10-Q
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements of Home Bancorp
Consolidated Balance Sheets as of March 31, 2000
and September 30, 1999 1
Consolidated Statements of Income for the three months
and six months ended March 31, 2000 and 1999 2
Consolidated Statements of Comprehensive Income for the
three and six months ended March 31, 2000 and 1999 3
Consolidated Statements of Cash Flows for the six
months ended March 31, 2000 and 1999 4
Notes to Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION 14
Items 1-6. 14
Signatures 15
Exhibit 27, Financial Data Schedule 16
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000 (unaudited) and SEPTEMBER 30, 1999
(unaudited)
ASSETS March 31, 2000 September 30, 1999
-------------- ------------------
<S> <C> <C>
Cash on hand and in other banks $ 2,034,188 $ 2,081,354
Federal funds sold 5,500,000 16,000,000
Interest earning deposits in other banks 5,216,456 18,231,528
------------- -------------
Total cash and cash equivalents 12,750,644 36,312,882
Securities available for sale (amortized cost of $34,034,271
and $23,342,452) 33,505,147 23,159,062
Loans receivable, net of allowance for loan losses:
$1,343,420 and $1,342,220 348,288,350 345,999,338
Federal Home Loan Bank stock 3,173,700 3,173,700
Accrued interest receivable 2,238,565 2,156,465
Premises and equipment, net 2,811,523 2,916,349
Other assets 723,183 239,004
------------- -------------
TOTAL ASSETS $ 403,491,112 $ 413,956,800
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits $ 353,318,789 $ 363,354,269
Federal Home Loan Bank advances 7,000,000 7,000,000
Advances from borrowers for taxes and insurance 3,178,754 2,971,219
Accrued interest payable 888,870 1,011,119
Other liabilities 1,542,500 1,697,102
------------- -------------
TOTAL LIABILITIES 365,928,913 376,033,709
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 5,000,000 shares authorized;
none issued -- --
Common stock, no par value, 10,000,000 shares authorized;
3,378,868 and 3,380,255 shares issued; 1,996,124 and
2,050,506 shares outstanding 35,187,206 34,874,404
Retained earnings, substantially restricted 33,165,326 32,159,378
Unearned ESOP shares (1,165,364) (1,287,963)
Unearned RRP shares (63,768) (232,608)
Treasury stock at cost, 1,382,744 and 1,329,749 shares (29,243,726) (27,480,087)
Accumulated other comprehensive loss net of tax of
$(211,649) and $(73,357) (317,475) (110,033)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 37,562,199 37,923,091
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 403,491,112 $ 413,956,800
============= =============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
1
<PAGE>
<TABLE>
<CAPTION>
HOME BANCORP
CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED MARCH 31, 2000 AND 1999
(unaudited)
3 Months Ended: March 31, 6 Months Ended: March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable, including fees $ 6,352,101 $ 6,147,852 $ 12,670,077 $ 12,244,105
Securities and other interest income 762,567 570,251 1,638,985 1,127,129
--------------- -------------- --------------- ----------------
Total interest income 7,114,668 6,718,103 14,309,062 13,371,234
INTEREST EXPENSE
Deposits 4,404,752 4,167,135 8,943,705 8,314,896
Federal Home Loan Bank advances 93,223 92,200 187,472 194,802
--------------- -------------- --------------- ----------------
Total interest expense 4,497,975 4,259,335 9,131,177 8,509,698
Net interest income 2,616,693 2,458,768 5,177,885 4,861,536
Provision for loan losses 600 600 1,200 1,200
--------------- -------------- --------------- ----------------
Net interest income after provision for loan losses 2,616,093 2,458,168 5,176,685 4,860,336
NON-INTEREST INCOME
Net losses on trading securities - (26,705) - (26,705)
Net gains (losses) on sales of securities available
for sale (11,718) 1,137 (11,718) 23,747
Net gains on sales of loans held for sale - - 2,005
Other 83,133 82,159 173,624 171,145
--------------- -------------- --------------- ----------------
Total non-interest income 71,415 56,591 161,906 170,192
NON-INTEREST EXPENSE
Employee compensation and benefits 774,464 787,187 1,736,215 1,555,461
Occupancy and equipment 169,143 215,182 355,618 388,516
FDIC insurance premiums 19,276 48,462 71,556 93,044
Other 391,119 231,730 792,019 417,830
--------------- -------------- --------------- ----------------
Total non-interest expense 1,354,002 1,282,561 2,955,408 2,454,851
--------------- -------------- --------------- ----------------
Income before income taxes and cumulative effect of
change in accounting principle 1,333,506 1,232,198 2,383,183 2,575,677
Income tax expense 539,506 498,189 976,183 1,076,668
--------------- -------------- --------------- ----------------
Income before cumulative effect of change in
accounting principle 794,000 734,009 1,407,000 1,499,009
Cumulative effect of change in accounting for derivative
instruments and hedging activities, net of tax - 54,991 - 54,991
--------------- -------------- --------------- ----------------
Net income $ 794,000 $ 789,000 $ 1,407,000 $ 1,554,000
=============== ============== =============== ================
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Earnings per share
Basic earning per common share
Income before cumulative effect of change
in accounting principle $ 0.42 $ 0.36 $ 0.75 $ 0.73
Cumulative effect of change in accounting
for derivative instruments and hedging
activities, net of tax - 0.03 - 0.03
--------------- -------------- --------------- ----------------
Net income $ 0.42 $ 0.39 $ 0.75 $ 0.76
=============== ============== =============== ================
Diluted earnings per common share
Income before cumulative effect of change
in accounting principle $ 0.42 $ 0.34 $ 0.73 $ 0.70
Cumulative effect of change in accounting
for derivative instrument and hedging
activities, net of tax - 0.03 - 0.03
--------------- -------------- --------------- ----------------
Net income $ 0.42 $ 0.37 $ 0.73 $ 0.73
=============== ============== =============== ================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
2
<PAGE>
HOME BANCORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE AND SIX MONTHS ENDED MARCH 31, 2000 AND 1999
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 794,000 $ 789,000 $ 1,407,000 $ 1,554,000
Other comprehensive income (loss):
Net change in net unrealized gains (losses)
on securities available for sale, net of
reclassification adjustments and tax effects (143,416) (5,620) (207,442) (34,095)
Net unrealized gains on securities transferred from
the held-to-maturity to the available-for-sale
category, net of tax, upon adoption of SFAS No. 133 -- 15,570 --
----------- ----------- -----------
15,570
Total other comprehensive income (loss) (143,416) 9,950 (207,442) (18,525)
----------- ----------- ----------- -----------
Total comprehensive income $ 650,584 $ 798,950 $ 1,199,558 $ 1,535,475
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE>
<TABLE>
<CAPTION>
HOME BANKCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2000 AND 1999
(unaudited)
Six Months Ended
March 31,
2000 1999
---- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 1,407,000 $ 1,554,000
Adjustments to reconcile net income to net cash from operating activities
Depreciation 152,926 172,479
Provision for loan losses 1,200 1,200
Net losses on trading securities - 26,705
Net (gains) losses on sales of securities available for sale 11,718 (23,747)
Net gains on sales of loans held for sale - (2,005)
Proceeds from sales of loans held for sale - 87,114
ESOP expense 223,206 305,525
Amortization of RRP contribution 147,688 116,533
Cumulative effect of change in accounting for derivative instruments and
hedging activities, net of tax - (54,991)
Proceeds from sales of trading securities - 4,077,500
Securities amortization and accretion, net (70,386) (30,611)
Change in
Accrued interest receivable (82,100) (101,786)
Accrued interest payable and other liabilities (270,912) (1,135,833)
Other assets (131,839) 80,958
--------------- --------------
Net cash from operating activities 1,388,501 5,073,041
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from maturities of securities held to maturity - 4,000,000
Proceeds from sales of securities available for sale 2,053,998 1,976,761
Purchase of securities available for sale (12,687,149) (18,345,313)
Net change in loans (2,290,212) (15,061,966)
Purchase of premises and equipment (48,100) (272,502)
-------------- --------------
Net cash from investing activities (12,971,463) (27,703,020)
CASH FLOW FROM FINANCING ACTIVITIES
Net change in deposit (10,035,480) 27,582,083
Advances from Federal Home Loan Bank - (2,000,000)
Net change in advances from borrowers for taxes and insurance 207,535 612,830
Purchase of treasury stock (2,468,135) (3,169,596)
Cash dividends paid (406,991) (392,920)
Proceeds from exercise of stock options 723,795 568,550
-------------- --------------
Net cash from financing activities (11,979,276) 23,200,947
-------------- --------------
Net change in cash and cash equivalents (23,562,238) 570,968
Cash and cash equivalents, beginning of period 36,312,882 23,365,826
-------------- --------------
Cash and cash equivalents, end of period $ 12,750,644 $ 23,936,794
============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Supplemental disclosures of cash flow information
Cash paid for
Interest $ 9,253,426 $ 8,652,776
Income taxes 1,113,144 1,171,302
Supplemental schedule of non-cash activities
Transfer of securities from held-to-maturity to trading $ - $ 4,015,191
Transfer of securities from held-to-maturity to available-for-sale - 4,007,930
Transfer from loans receivable to loans held for sale - 85,109
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
Notes to Consolidated Financial Statements
(Unaudited)
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, 2000 and for the interim periods
ended March 31, 2000, and 1999 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. Securities
The Company classifies securities into held to maturity, available for sale and
trading categories. Held to maturity securities are those which the Company has
the positive intent and ability to hold to maturity, and are reported at
amortized cost. Available for sale securities are those the Company may decide
to sell if needed for liquidity, asset liability management or other reasons.
Available for sale securities are reported at fair value, with net unrealized
gains and losses included as a separate component of other comprehensive income
(loss) and shareholders' equity, net of tax. Trading securities are bought
principally for sale in the near term, and are reported at fair value with
unrealized gains and losses included in earnings.
Gains and losses on the sale of securities are determined using the specific
identification method based on amortized cost and are reflected in results of
operations at the time of sale. Interest and dividend income, adjusted by
amortization of purchase premium or discount over the estimated life of the
security using the level yield method, is included in earnings.
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities, requires all derivatives to be
recorded at fair value. Unless designated as hedges, changes in these fair
values will be recorded in the income statement. Fair value changes involving
hedges will generally be recorded by offsetting gains and losses on the hedge
and the hedged item, even if the fair value of the hedged item is not otherwise
recorded. As of January 1, 1999, the Company adopted this statement and, in
accordance with its provisions, chose to reclassify certain securities from
held-to-maturity to trading and available-for-sale. The amortized cost of
securities transferred to available for sale was $4,007,930 and the unrealized
net gain was $26,444, which was included in shareholders' equity, net of income
tax of $10,874. The amortized cost of the securities transferred to trading was
$4,015,191 and the unrealized net gain was $91,060, which is reported as the
cumulative effect of change in accounting principle, net of tax of $36, 069. The
Company has no derivative instruments to account for under the provisions of
this statement.
(Continued)
5
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
Notes to Consolidated Financial Statements
(Unaudited)
C. Earnings Per Share
Basic earnings per common share is based on the net income divided by the
weighted average number of common shares outstanding during the period. Employee
Stock Ownership Plan (ESOP) shares are considered outstanding for earnings per
common share calculations as they are committed to be released; unearned shares
are not considered outstanding. Recognition and retention plan (RRP) shares are
considered outstanding for earnings per common share calculations as they become
vested. Diluted earnings per common share shows the dilutive effect of
additional potential common shares issuable under stock options and nonvested
shares issued under the RRP. Earnings per common shares are restated for all
stock splits and dividends.
A reconciliation of the numerators and denominators used in the computation of
the basic and diluted earnings per common share is presented below: The
information below is presented in thousands except for per share information.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic earnings per common share
Numerator
Income before cumulative effect of change in
accounting principle $ 794 $ 734 $ 1,407 $ 1,499
Cumulative effect of change in accounting for derivative
instruments and hedging activities, net of tax - 55 - 55
------------- ------------- ------------- -------------
Net income $ 794 $ 789 $ 1,407 $ 1,554
============= ============= ============= =============
Denominator
Weighted average common shares outstanding 2,010 2,201 2,026 2,220
Less: Average unallocated ESOP shares (124) (144) (126) (147)
Less: Average non-vested RRP shares (10) (26) (12) (27)
------------- ------------- ------------- -------------
Weighted average common shares outstanding
for basic earnings per common share 1,876 2,031 1,888 $ 2,046
============= ============= ============= =============
Basic earnings per common share
Income before cumulative effect of change
in accounting principle $ 0.42 $ 0.36 $ 0.75 $ 0.73
Cumulative effect of change in accounting for derivative
instruments and hedging activities, net of tax - 0.03 - 0.03
------------- ------------- ------------- -------------
Net income $ 0.42 $ 0.39 $ 0.75 $ 0.76
============= ============= ============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Diluted earnings per common share
Numerator
Income before cumulative effect of change
in accounting principle $ 794 $ 734 $ 1,407 $ 1,499
Cumulative effect of change in accounting for derivative
instruments and hedging activities, net of tax - 55 - 55
------------- ------------- ------------- -------------
Net income $ 794 $ 789 $ 1,407 $ 1,554
============= ============= ============= =============
Denominator
Weighted average common shares outstanding
for basic earnings per common share 1,876 2,031 1,888 2,046
Add: Dilutive effects of assumed exercises of
stock options 11 76 27 76
Add: Dilutive effects of average nonvested RRP shares - 2 - 3
------------- ------------- ------------- -------------
Weighted average common shares and
dilutive potential common shares outstanding 1,887 2,109 1,915 2,125
============= ============= ============= =============
Diluted earnings per common share
Income before cumulative effect of change in
accounting principle $ 0.42 $ 0.34 $ 0.73 $ 0.70
Cumulative effect of change in accounting for derivative
instruments and hedging activities, net of tax - 0.03 - 0.03
------------- ------------- ------------- -------------
Net income $ 0.42 $ 0.37 $ 0.73 $ 0.73
============= ============= ============= =============
</TABLE>
6
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
Management's Discussion and
Analysis of Financial Condition and
Results of Operations
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 marketplace 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 statements: the
strength of the US 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 the 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.
(Continued)
7
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
Management's Discussion and
Analysis of Financial Condition and
Results of Operations
Item 2 Continued
Financial Condition
The Company's total assets were $403.5 million as of March 31, 2000 compared to
$414.0 million as of September 30 1999, a decrease of $10.5 million. For the
same period, equity decreased very slightly from $37.9 million as of September
30, 1999 to $37.6 million as of March 31, 2000. The decrease in total assets was
the result of a more restrictive depository interest rate structure and
management's effort to reduce excess liquidity after the successful Year 2000
rollover. The Company reduced excess liquidity in the form of overnight federal
funds sold. These funds were primarily funded by short-term certificates of
deposit (CDs).
Net loans receivable increased $2.3 million, primarily from 1-4 family
residential originations, from $346.0 million at September 30, 1999 to $348.3
million at March 31, 2000. Deposits decreased $10.1 million for the three month
period, decreasing from $363.4 million as of September 30, 1999 to $353.3
million as of March 31, 2000 as the Company attempts to reduce its dependence on
short-term CDs.
Cash and cash equivalents decreased from $36.3 million as of September 30, 1999
to $12.8 million as of March 31, 2000. On January 1, 1999 the Company adopted
SFAS No. 133 and reclassified all of its securities held for maturity to
securities available for sale and trading. All securities classified as trading
were sold during the quarter ended March 31, 1999. As of March 31, 2000,
securities available for sale totaled $33.5 million, an increase of $10.3
million from September 30, 1999.
As of both March 31, 2000 and September 30, 1999 the Company held no foreclosed
real estate.
The balance in Federal Home Loan Bank advances remained unchanged at $7.0
million during the six-month period ended March 31, 2000.
Advances from borrowers for taxes and insurance increased from $3.0 million as
of September 30, 1999 to $3.2 million as of March 31, 2000 primarily from the
timing of semi-annual payments of real estate taxes and annual insurance
premiums on behalf of loan customers. Other liabilities decreased slightly from
$1.7 million as of September 30, 1999 to $1.5 million as March 31, 2000.
Results of Operation
General. Net income for the six months ended March 31, 2000 decreased by
$147,000 or 9.5% from $1,554,000 in 1999 to $1,407,000 in 2000. Net income for
the three months ended March 31, 2000 increased by $5,000, or 0.6%, to $794,000
from $789,000 for the same period ended March 31, 1999. Despite a slowdown in
residential mortgage closings and the general rising cost of funding, the small
increase is attributed to an increase in average assets and maintenance of the
net interest margin. Three-month period results will be emphasized due to the
severance expense associated with the early retirement of former Chairman and
Chief Executive Officer, Mr. W. Paul Wolf. This non-recurring expense adversely
impacted first quarter results by $212,000 or $127,000, net of tax, and second
quarter results by $44,000 or $26,000, net of tax. The second quarter severance
expense impact will continue to impact future quarterly earnings through March
31, 2001, as additional severance expense payments are made. Management believes
that second quarter results will reveal a more accurate view of future earnings.
The three and six month earnings represent an annualized return on average
assets (ROA) of 0.77% and 0.68% and a return on average equity (ROE) of 8.54%
and 7.58%. For the like periods ended March 31, 1999, earnings represent an
annualized ROA of 0.81% and 0.81% and a ROE of 7.86% and 7.72%.
Net Interest Income. The Company's net income is primarily dependent upon net
interest income. Net interest income
(Continued)
8
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
Management's Discussion and
Analysis of Financial Condition and
Results of Operations
Item 2 Continued
for the three and six month periods ended March 31, 2000 increased by
approximately $158,000 and $316,000 compared to the same periods in 1999. This
increase was primarily the net result of a slight reduction in interest rate
spreads earned on higher average interest earning balances.
Total interest income at March 31, 2000 increased by approximately $397,000 and
$938,000 for the three and six month periods when compared to the same periods
ended March 31, 1999. The yield on average interest-earning assets increased
slightly in the three month period ended March 31, 2000 to 7.03%, compared to
7.02% for the same period in the preceding year, whereas the yield for the
comparative six month periods ended March 31 declined from 7.14% in 1999 to
7.00% in 2000.
The growth in total interest income was partially offset by increased interest
expense during the three and six month periods ended March 31, 2000. Interest
expense increased by approximately $239,000 and $621,000 for the three and six
month periods in comparison to the like periods in 1999. This increase was the
result of increased average balances of interest-bearing liabilities and, for
the three month period, an increase in average funding costs as compared to the
like period from the prior year. For the three month period ended March 31,
2000, the average cost of interest-bearing liabilities was 5.00%, up from 4.96%
for the same period in 1999. The Company's average costs of funds continues to
be higher than those experienced by our average 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 general market
rates of interest generally adversely affect the net income of most financial
institutions. Because the Company's liabilities generally reprice more quickly
than its assets, interest margins would likely decrease if interest rates were
to rise, or the yield on repricing assets was not enhanced.
Provision for Loan Losses. The provision for loan losses is a result of
management's periodic analysis of the adequacy of the allowance for loan losses.
The provision for loan losses was $600 and $1,200 for the three and six months
ended March 31, 2000, the same amount for the like periods in 1999.
Changes in the provision for loan losses are attributed to management's analysis
of the adequacy of the allowance for loan losses to address recognizable and
currently anticipated losses. At March 31, 2000, the Company's allowance for
loan losses totaled $1.3 million or .39% of net loans receivable and 719.54% 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. 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.
(Continued)
9
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
Management's Discussion and
Analysis of Financial Condition and
Results of Operations
Item 2 Continued
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 or real estate owned. Non-interest
income increased approximately $15,000 for the three month period ended March
31, 2000 in comparison to the like period in 1999 and it decreased approximately
$8,000 for the six month period ended March 31, 2000 in comparison to the like
period in 1999. The three month increase was attributed primarily to a decrease
net losses realized on trading securities and the sale of securities available
for sale. The opposite impact was experienced for the comparative six month
periods.
Non-Interest Expense. Non-interest expenses for the three and six month periods
ended March 31, 2000 increased approximately $71,000 and $501,000, compared to
the same prior year periods in 1999. Employee compensation and benefits have
decreased by approximately $13,000 for the three month period and increased by
approximately $181,000 for the six month period as compared to the same periods
in 1999. The most significant reason for the large increase in the six month
period expense is the expenses associated with the severance agreement with Mr.
W. Paul Wolf, as discussed above. For the three month and six month periods
ended March 31, 2000, occupancy and equipment expense is down from the prior
year periods by approximately $46,000 and $33,000. These decreases are generally
the result of the Company's continued cost containment efforts. Other expenses
were approximately $159,000 and $374,000 higher for the three and six month
periods ended March 31, 2000 than for the same periods a year earlier. This
change is attributed primarily to fluctuations in the number and timing of loan
originations where applied costs are reduced by associated income. The slowdown
in originations of 1-4 family residential mortgages, the Company's primary
focus, is consistent with a rising interest rate environment after a large
refinancing period.
Income Tax Expense. Income tax expense for the three and six month periods ended
March 31, 2000 reflects higher pretax earnings than in the previous like year
periods. The effective tax rate on income before income taxes ranged from
40%-41% for the three and six month periods ended March 31, 2000 and 1999.
Liquidity and Capital Resources
The Company's primary source of funds are deposits, principal and interest
payments on loans, and sales and maturities of securities available for sale.
While maturities of 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
(FHLB) of Indianapolis. At March 31, 2000, 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, 2000, the Bank's quarterly liquidity ratio was
14.0%. As of March 31, 1999, the Bank's liquidity ratio was 12.4%.
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 liquidity needs.
At March 31, 2000 the Bank had outstanding commitments to extend credit which
amounted to $14.9 million (including $12.4 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
(Continued)
10
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
Management's Discussion and
Analysis of Financial Condition and
Results of Operations
Item 2 Continued
a percent of total adjusted assets. As of March 31, 2000, the Bank had tangible
and core capital of $32.6 million, or 8.16% of adjusted total assets. Risk-based
capital totaled $34.0 million, or 17.19% of risk-based assets. The institution
substantially exceeded all regulatory capital standards.
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,
<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS (Averages) 2000 1999 2000 1999
---- ---- ---- ----
Return on assets*........................ 0.77% 0.81% 0.68% 0.81%
Return on equity*........................ 8.54% 7.86% 7.58% 7.72%
Yield on interest-earning assets*........ 7.03% 7.02% 7.00% 7.14%
Cost of interest-bearing liabilities*.... 5.00% 4.96% 5.02% 5.07%
Net interest spread*..................... 2.03% 2.06% 1.98% 2.07%
Net interest rate margin*................ 2.59% 2.52% 2.53% 2.55%
Net interest income to operating (G&A)
expenses............................... 193.26% 191.71% 175.20% 198.04%
Operating (G&A) expenses to average assets* 1.31% 1.32% 1.42% 1.29%
Non-interest income to average assets*... 0.07% 0.06% 0.08% 0.09%
Interest-earning assets to interest-bearing
liabilities............................ 112.49% 111.36% 112.31% 111.73%
Efficiency ratio......................... 50.37% 50.99% 55.35% 48.79%
Equity to assets (at end of period)...... 9.31% 10.11% 9.31% 10.11%
Tangible equity to assets (at end of period) 9.31% 10.11% 9.31% 10.11%
Average assets (dollars in thousands).... $412,099 $389,707 $416,842 $381,497
Average capital (dollars in thousands)... $37,171 $40,153 $37,146 $40,259
ASSET QUALITY RATIOS
Non-performing assets to total assets.... 0.05% 0.10% 0.05% 0.10%
Non-performing loans to net loans........ 0.05% 0.12% 0.05% 0.12%
Allowance for loan losses to net loans... 0.39% 0.41% 0.39% 0.41%
Allowance for loan losses to non-performing
loans.................................... 719.54% 344% 719.54% 344%
Net charge offs to loans*................ ---- ---- --- ---
Loans to deposits........................ 98.58% 98.71% 98.58% 98.71%
Loans to assets.......................... 86.31% 85.52% 86.31% 85.52%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PER COMMON SHARE
Net income............................... $ 0.42 $ 0.39 $ 0.75 $ 0.76
Net income (diluted)..................... 0.42 0.37 $ 0.73 $ 0.73
Book value............................... 18.82 18.43 18.82 18.43
Tangible book value...................... 18.82 18.43 18.82 18.43
STOCK PRICE
High..................................... $ 18.250 $ 33.500 $ 28.000 $33.500
Low...................................... 15.250 27.500 15.250 26.500
Close.................................... 15.375 27.750 15.375 27.750
* Annualized
</TABLE>
11
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
Quantitative and Qualitative Disclosures About Market Risk
Item 3
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 to 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
attempts to provide an asset/liability match on these products.
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.
The information presented below is based on the OTS's Interest Rate Risk
Exposure Report for March 31, 2000. Shown 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. To manage this
risk, the Company will sell the majority of the new fixed rate residential loans
it originates while retaining new adjustable rate loans. Efforts to increase the
level of core deposits while reducing the Company's dependence on short term CDs
are also underway. These efforts will be used in conjunction with the investment
portfolio to manage the Company's interest rate risk.
(Continued)
12
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
Item 3 Continued
- ---------------------------------------------------------------------------
Rate Shock Board Limit NPV Ratio
(Basis Points) (min NPV ratios) (calculated NPV ratios)
- -------------- ---------------- -----------------------
+300 bp 3.50% 2.52%
+200 bp 4.00% 4.54%
+100 bp 4.50% 6.50%
0 bp 6.00% 8.31%
-100 bp 6.00% 9.74%
-200 bp 6.00% 10.42%
-300 bp 6.00% 10.48%
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 advance of changes in general market interest
rates, while interest rates on other types may lag behind changes in general
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.
13
<PAGE>
HOME BANCORP
Fort Wayne, Indiana
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 and Use of Proceeds
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit 27, Financial Data Schedule, on page 16.
(b) Reports on Form 8-K
Press releases filed on Form 8-K during the quarter ended March 31,
2000 include:
Date of Report Subject
1-25-2000 Registrant's Press Release Relative to
Annual Shareholders' Meeting
2-14-2000 Registrant's Press Release Relative to
First Quarter Earnings
3-22-2000 Registrant's Press Release Relative to
Declared Cash Dividend
14
<PAGE>
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 15, 2000 /s/ Donald E. Thornton
----------------------
Donald E. Thornton
Senior Vice-President
Date: May 15, 2000 /s/ Timothy A. Sheppard
-----------------------
Timothy A. Sheppard
Treasurer
15
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,034
<INT-BEARING-DEPOSITS> 5,216
<FED-FUNDS-SOLD> 5,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,505
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 349,632
<ALLOWANCE> 1,343
<TOTAL-ASSETS> 403,491
<DEPOSITS> 353,319
<SHORT-TERM> 5,000
<LIABILITIES-OTHER> 5,610
<LONG-TERM> 2,000
0
0
<COMMON> 35,187
<OTHER-SE> 2,375
<TOTAL-LIABILITIES-AND-EQUITY> 403,491
<INTEREST-LOAN> 12,670
<INTEREST-INVEST> 839
<INTEREST-OTHER> 800
<INTEREST-TOTAL> 14,309
<INTEREST-DEPOSIT> 8,944
<INTEREST-EXPENSE> 9,131
<INTEREST-INCOME-NET> 5,178
<LOAN-LOSSES> 1
<SECURITIES-GAINS> (12)
<EXPENSE-OTHER> 2,955
<INCOME-PRETAX> 2,383
<INCOME-PRE-EXTRAORDINARY> 1,407
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,407
<EPS-BASIC> 0.75
<EPS-DILUTED> 0.73
<YIELD-ACTUAL> 2.53
<LOANS-NON> 0
<LOANS-PAST> 187
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,342
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,343
<ALLOWANCE-DOMESTIC> 1,223
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 120
</TABLE>
