UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
or
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_____________________to________________________
Commission File Number: 0-24896
Home Building Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Indiana
(State or other jurisdiction of incorporation or organization)
35-1935840
(I.R.S. Employer identification No.)
200 East VanTrees Street, Washington, Indiana 47501
(Address of principal executive offices) (Zip Code)
(812) 254-2641
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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 shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing for
the past 90 days. {X}Yes { } No
As of August 14, 1996, there were 331,660 shares of the Registrant's common
stock issued and outstanding. Indicate the number of shares outstanding of
each of the issuer's classes of common stock as of the latest practicable date.
Common Stock 331,660 Shares of common stock
issued and outstanding
<PAGE>
HOME BUILDING BANCORP, INC.
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
Consolidated Statements of Financial Condition at September 30, 1995 1
and June 30, 1996
Consolidated Statements of Income for the three and nine months
ended June 30, 1995 and 1996 2
Consolidated Statements of Changes in Stockholders' Equity for the
nine months ended June 30, 1995 and 1996 3
Consolidated Statements of Cash Flows for the nine months ended
June 30, 1995 and 1996 4
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 8
and results of Operations
Part II. Other Information 14
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Exhibit Index 16
<PAGE>
<TABLE>
HOME BUILDING BANCORP, INC.
WASHINGTON, INDIANA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
(Unaudited)
Sept. 30,
June 30,
June 30,
1995
1995
1996
1996
ASSETS
<S>
<C<
<C>
Cash and equivalents
$
3,338,677
$
5,538,843
Certificates of deposit with other banks
1,880,000
1,482,871
Loans, net
28,881,714
27,694,240
Investments available for sale at fair value
2,003,527
2,383,181
Investments held to maturity at cost
499,625
-
Mortgage-backed securities available for sale at fair value
1,236,325
4,428,598
Mortgage-backed securities held to maturity at cost
2,795,027
504,360
Office property and equipment, net
809,054
788,260
Accrued interest receivable
154,315
156,301
Other assets
71,246
158,335
Total Assets
$
41,669,510
$
43,134,989
LIABILITIES AND STOCKHOLDERS' EQUITY
Passbook savings
$
5,427,599
$
6,717,151
Demand and NOW accounts
5,808,346
4,895,105
Certificates of deposit
20,033,498
21,103,091
Total Deposits
31,269,443
32,715,347
Advances from Federal Home Loan Bank
2,930,153
3,930,153
Repurchase agreements
1,138,245
360,821
Advances from borrowers
33,218
21,425
Other liabilities
222,739
92,451
Total Liabilities
35,593,798
37,120,197
Stockholders' Equity
Common stock, $.01 par value, 1 million shares authorized,
322,000 issues and outstanding at September 30, 1996 and
331,660 issued and outstanding at June 30, 1996
3,220
3,317
Additional paid in capital
2,855,642
3,014,935
Retained earnings
3,451,949
3,402,330
Unrealized (loss) on available for sale securities
net of deferred tax
(3,259)
(14,560)
Unearned compensation-ESOP
(231,840)
(231,840)
Unearned compensation-RRP
-
(159,390)
Total Equity
6,075,712
6,014,792
Total Liabilities and Equity
$
41,669,510
$
43,134,989
</TABLE>
See notes to consolidated financial statements.
- - - - -1-
<PAGE>
HOME BUILDING BANCORP, INC.
WASHINGTON, INDIANA
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
(Unaudited) (Unaudited)
1995 1996 1995 1996
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans receivable
$
608,575
$
588,824
$
1,814,939
$
1,818,722
Investments
34,224
39,695
133,270
117,191
Mortgage-backed securities
43,562
94,468
133,485
252,745
Deposits with other banks
70,647
72,227
207,705
206,992
Total interest income
757,008
795,214
2,289,399
2,395,650
INTEREST EXPENSE
Interest on savings accounts
339,757
387,285
1,064,169
1,126,142
Interest on borrowed money
52,434
63,523
126,226
183,498
Total interest expense
392,191
450,808
1,190,395
1,309,640
Net interest income
364,817
344,406
1,099,004
1,086,010
Provision for loan losses
-
-
-
356,500
Net interest income after provision
for loan losses
364,817
344,406
1,099,004
729,510
NONINTEREST INCOME
Gain on sale of assets
6,291
1,106
6,598
5,931
Customer service fees
33,519
54,284
88,018
119,183
Total noninterest income
39,810
55,390
94,616
125,114
NONINTEREST EXPENSE
General and administrative
Compensation and benefits
119,763
105,057
347,627
393,107
Occupancy and equipment
32,767
36,647
101,083
107,372
Deposit insurance premium
14,173
19,006
55,890
56,744
Computer expense
11,635
14,281
38,359
42,077
Service fees-NOW
11,687
9,508
34,318
33,055
Advertising expense
14,539
11,191
38,249
35,226
Professional fees
21,905
19,622
29,705
46,664
Other
18,797
54,821
72,998
112,636
Total noninterest expense
245,266
270,133
718,229
826,881
INCOME BEFORE INCOME TAX
159,361
129,663
475,391
27,743
Income tax expense
60,634
47,712
176,604
4,912
NET INCOME
$
98,727
$
81,951
$
298,787
$
22,831
</TABLE>
See notes to consolidated financial statements.
- - - - -2-
<PAGE>
<TABLE>
HOME BUILDING BANCORP, INC.
WASHINGTON, INDIANA
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
<CAPTION>
Nine months ended
June 30,
(Unaudited)
(Unaudited)
1995
1996
<S>
<C>
<C>
Common stock, $.01 par value, 1 million shares
Beginning of the period
authorized, 322,000 issued and outstanding
$
3,220
$
3,220
Issuance of 9,660 shares under the Recognition
and Retention Plan(RRP)
97
End of the period
3,220
3,317
Additional paid in capital
Beginning of the period
2,855,642
2,855,642
Issuance of 9,660 shares under the Recognition
and Retention Plan(RRP)
159,293
End of the period
2,855,642
3,014,935
Retained earnings:
Beginning of the period
3,026,838
3,451,949
Net income
298,787
22,831
Dividends declared, $0.075
per share
(72,450)
End of the period
3,325,625
3,402,330
Unrealized gain (loss) on securities available
for sale net of deferred tax:
Beginning of the period
-
(3,259)
Effect of change in accounting principal,
implementation of FASB No. 115
(35,000)
Change in unrealized gain or loss
27,127
(11,301)
End of the period
(7,873)
(14,560)
Unearned compensation-ESOP
(257,600)
(231,840)
Unearned compensation-RRP
(159,390)
Total equity
$
5,919,014
$
6,014,792
</TABLE>
See notes to consolidated financial statements.
- - - - -3-
<PAGE>
<TABLE>
HOME BUILDING BANCORP, INC.
WASHINGTON, INDIANA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine months ended
June 30,
(Unaudited)
(Unaudited)
1995
1995
1996
1996
<S>
<C>
<C>
NET INCOME (LOSS)
$
298,787
$
22,831
Adjustments to reconcile net income to net cash
(used by) provided by operating activities:
Depreciation
28,920
28,773
(Increase) decrease in other assets
55,576
(94,648)
(Increase) decrease in interest receivable
(41,327)
(1,986)
(Decrease) increase in other liabilities
104,931
(136,611)
(Decrease) increase in advances
(28,052)
(11,793)
Provision for loan loss
-
356,500
(Gain) loss on sale of assets
(6,291)
(5,931)
Cash provided by operating activities
412,544
157,135
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in certificates of deposit in other
financial institutions, net (increase) decrease
(884,947)
397,129
Maturities of mortgage-backed securities H-T-M
300,512
144,573
Purchase of mortgage-backed securities A-F-S
-
(1,576,253)
Maturities of mortgage-back securities A-F-S
-
513,181
Maturities of investments H-T-M
312,166
-
Maturities of investments A-F-S
-
618,920
Purchase of investment securities
(1,003,078)
(500,000)
Net (increase) decrease in loans
698,316
810,974
Sale of foreclosed collateral
6,291
38,477
Cash provided (used) by investing activities
(570,740)
447,001
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits,
NOW accounts, savings accounts and certificates of deposit
(559,563)
1,445,904
Proceeds from issuance of advances
-
1,000,000
Decrease in repurchase agreements
-
(777,424)
Payment of dividends
-
(72,450)
Cash provided (used) by financing activities
(559,563)
1,596,030
Net increase (decrease) in cash and cash equivalents
(717,759)
2,200,166
Cash and cash equivalents at beginning of period
4,244,635
3,338,677
Cash and cash equivalents at end of period
$
3,526,876
$
5,538,843
</TABLE>
See notes to consolidated financial statements.
- - - - -4-
<PAGE>
<TABLE>
HOME BUILDING BANCORP, INC.
WASHINGTON, INDIANA
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine months ended
June 30,
(Unaudited)
(Unaudited)
1995
1995
1996
1996
<S>
<C>
<C>
Cash paid for:
Interest
$
1,090,464
$
1,307,339
Income taxes
$
110,753
$
66,614
Non-cash investing and financing activities:
Aggregate investments at market transfered
from held-to-maturity and reclassified as
available-for-sale
$
-
$
2,645,719
Deposits transferred to stock and paid-in capital
in connection with stock conversion, net of
$
2,601,262
$
-
expenses totaling $361,138
</TABLE>
See notes to consolidated financial statements.
- - - - -5-
<PAGE>
Home Building Savings Bank, FSB
Notes to Consolidated Financial Statements
June 30, 1995 and 1996
Note 1: Basis of Presentation
The unaudited information for the three and nine months ended June 30, 1996,
includes the results of operations of Home Building Bancorp, Inc. (the
"Company") and its wholly owned subsidiary Home Building Savings Bank, FSB
(the "Bank"). In the opinion of management of the Company and the Bank, the
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the consolidated financial
statements. These interim financial statements should be read in conjunction
with the Bank's most recent annual financial statements and footnotes included
in the annual report of Home Building Bancorp, Inc. for the fiscal year ended
September 30, 1995. The results of the period presented are not necessarily
representative of the results of operations and cash flows which may be
expected for the entire year.
Note 2: Principles of Consolidation
The consolidated financial statements include the accounts of Home Building
Bancorp, Inc. Home Building Savings Bank, FSB, and the Bank's subsidiary. All
significant inter-company balances and transactions have been eliminated in
consolidation.
Note 3: Stock Conversion
On February 7, 1995, Home Building Bancorp, Inc. began trading as a public
company on the Nasdaq SmallCap Market. The Company issued 322,000 shares,
$.01 par value common stock, for proceeds of $2,858,862, net expenses of
approximately $361,000. The Bank converted to a federal stock savings bank
following the formation of the holding company and received proceeds of
$1,432,853 in exchange for all its common stock. This transaction was
accounted for using the pooling of interests method.
Concurrent with the conversion the board of directors approved the adoption
of the Home Building Bancorp, Inc. Employees Stock Ownership Plan (the "ESOP").
The ESOP is intended to qualify under Sections 401 (a) and 501 (a) of the
Internal Revenue Code. Eligibility is based on hours of service, date of hire,
and age. Contributions to the ESOP are determined by the board of directors,
in the form of cash or the Company's common stock. No employee contributions
are accepted. Contributions are allocated based on the ratio of the
participant's compensation to total compensation of all participants.
Participant's account balances are fully vested after five years of service.
- - - - -6-
<PAGE>
Home Building Savings Bank, FSB
Notes to Consolidated Financial Statements
June 30, 1995 and 1996
(Concluded)
Note 4: Recognition and Retention Plan
The Company has established a Recognition and Retention Plan ("RRP") equal to
4% (12,880 shares) of the original stock offering for the benefit of directors,
officers and employees of the Company and the Bank. To fund the current
awards for the Plan, the Company has issued an additional 9,660 shares of
common stock. The awards will vest over a period of five years subject to
the "continuous service" (as defined in the Plan) of the director, officer or
employee and provisions of the Plan and agreements enter into thereunder.
Note 5: Earnings Per Common Share
Net income of $0.27 per common share for the three month period and $0.08 for
the nine month period ended June 30, 1996, were computed by dividing the net
income for the periods by the weighted average number of shares of common
stock outstanding, less Employee Stock Ownership Plan and Recognition and
Retention Plan shares not committed to be released. The weighted average number
of shares outstanding for both periods was 299,007.
Note 6: Loan Loss Provision
The allowance for loan losses decreased $381,000 to $53,000 for the three month
period ended June 30, 1996. This decrease was due to loan losses recognized
by the Bank. A provision of $357,000 had been made during the previous
quarter in anticipation of certain losses. On March 26, 1996, the Bank was
advised that a commercial borrower had filed for Chapter 7 bankruptcy
protection. At such date, the Bank had loans receivable from the commercial
borrower totaling $512,000 secured by automobiles. Activity in the allowance
for loan losses is as follows:
June 30,
1995 1996
Beginning $ 77,000 $ 77,000
Provision - 356,500
Chargeoffs - 383,000
Recoveries - 2,600
Ending $ 77,000 $ 53,100
- - - - -7-
<PAGE>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
General
Home Building Bancorp, Inc. (the "Company") was formed at the direction of
Home Building Savings Bank, FSB (the "Bank"), for the purpose of owning
all the stock outstanding in the Bank. The Company incorporated under the laws
of the State of Indiana and is generally authorized to engage in any activity
that is permitted under Indiana law. On February 7, 1995, the Company acquired
all the stock of the Bank in accordance with the approved plan of conversion.
The Company had not engaged in any material operations at June 30, 1996, and
had no significant assets other than its equity investment in the Bank's stock,
cash, investment securities, and a loan to the Bank's ESOP.
Established in 1908, Home Building Savings Bank, FSB is a community oriented
financial institution offering a variety of financial services to meet the
needs of the communities it serves. The Bank's primary market area covers
Daviess and Pike counties in southwestern Indiana. The Bank attracts deposits
from the general public and uses such deposits, together with borrowings and
other funds, to originate one-to four-family residential mortgages, automobile
and consumer loans, and to a lesser extent commercial, multifamily, and
construction real estate loans. The Bank also invests in U.S. government and
agency obligations and may invest in other permissible investments.
The Company's results of operations are primarily dependent upon its net
interest income, which is the difference between interest earned on loans and
investments and interest paid on deposits and other borrowed funds. Net
interest income is directly affected by the relative amounts of interest
earning assets and interest bearing liabilities and the interest rates earned
or paid on such amounts. The Company's results of operations are also affected
by the provision for loan losses and the level of noninterest income and
expenses. Noninterest income consists primarily of service charges and net
income from the Bank's wholly owned service corporation subsidiary.
Noninterest expense includes salaries and employee benefits, occupancy
expenses, federal deposit insurance premiums, data processing expenses, and
other operating expenses. The operating results of the Company are also
affected by general economic conditions, the monetary and fiscal policies of
federal agencies, and the policies of agencies that regulate financial
institutions. The Company's cost of funds is influenced by interest rates
on competing investments and general market rates of interest. Lending
activities are influenced by the demand for real estate loans and other types
of loans, which in turn is affected by the rates of interest at which loans are
offered, general economic conditions affecting loan demand, and the
availability of funds for lending activities.
Financial Condition
For the nine months ended June 30, 1996 total assets increased $1.4 million
to $43.1 million from $41.7 million at September 30, 1995. The increase is
reflected primarily in cash and cash equivalents which increased $2.2 million
and mortgage-backed securities which increased by $902,000. Loans receivable
decreased $1.2 million or 4.1%, to $27.7 million in part due to he chargeoff
of the loan losses described below. The Company had $6.8 million of its
- - - - -8-
<PAGE>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
(continued)
Financial Condition (continued)
investment portfolio in available for sale as of June 30, 1996. The increase
in assets was funded by the increase in certificates of deposit, passbook
savings accounts, and advances from the Federal Home Loan Bank ("FHLB").
Passbook savings accounts and certificates of deposits increased by $2.4
million, while demand and NOW accounts decreased by $913,000. The Company
has maintained deposit interest rates which are competitive for its marketplace
and was successful during the period at retaining and increasing deposits as
well as maintaining its cost of funds. The Company borrowed an additional
$1.0 million from the FHLB, increasing total advances from the FHLB to
$3.9 million. Repurchase agreements decreased from $1.1 million to $361,000,
as the Company replaced these borrowings with certificates of deposits.
Results of Operations:
Comparison of the three and nine months ended June 30, 1996 and 1995.
General. The Company experienced net income of $82,000 for the quarter and
net income of $23,000 for the nine months ended June 30, 1996, respectively,
compared to net income of $99,000 and $299,000 for the same periods in 1995.
The decrease in net income for the nine months was primarily the result of the
provision for loan losses taken by the Company in connection with the
bankruptcy of a commercial borrower. The decrease for the three months was
caused by a $20,000 decrease in net interest income partially offset by a
$15,000 increase in noninterest income and a $25,000 increase in noninterest
expense.
Interest Income. Total interest income increased by $38,000 or 5.0%, to
$795,000 for the three months ended June 30, 1996 compared to the same period
last year. Interest income earned by the Company's loan portfolio decreased
$20,000 for the three months ended June 30, 1996 compared to a year ago. This
decrease was the result of a shift in the Company's loan portfolio from loans,
which decreased from nine months ago, to mortgage-backed securities and other
investments. Interest income from mortgage-backed securities, deposits,
and other investments increased $58,000 for the most recent quarter, to
$206,000, compared to $148,000 the same period a year ago. The increase was
primarily due to an increase in these investments of approximately $2.0
million from $4.7 million at June 30, 1995, to $6.7 million at June 30, 1996.
Interest Expense. Total interest expense increased $59,000, or 15.0%, to
$451,000 for the three months ended June 30, 1996 compared to $392,000 for the
same period last year. The increase was due to interest paid on additional
FHLB advances and a larger base of deposits. The average cost of savings
has remained relatively constant with the average rate at June 30, 1996 being
4.58%, compared to 4.52% at September 30, 1995. The overall cost of funds,
including FHLB advances and repurchases was 4.67% at June 30, 1996 compared
to 4.68% at September 30, 1995.
- - - - -9-
<PAGE>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
(continued)
Net Interest Income. Net interest income before provision for loan losses
decreased $20,000, or 5.6%, to $344,000 for the quarter ended June 30, 1996
compared to the same quarter a year ago. For the nine month period net
interest income before provision for loan losses decreased $13,000, or 1.2%
to $1,086,000 from $1,099,000 for the same period last year. As of June 30,
1996, the percentage of average interest earning assets to average interest
bearing liabilities was 114%.
Demand for mortgage loans has increased during the most recent quarter, but
has not kept pace with repayments over the past nine month period. Short term
interest rates, from which the Company determines the rates it offers deposit
customers, increased only slightly during the quarter, allowing the Company
to keep deposit rates steady. Significant increases in short term interest
rates would adversely affect the Company s interest rate spread and thus
interest income. The Company s liabilities are generally shorter in term and
subject to repricing more frequently than assets. In an effort to manage its
interest rate risk, the Company continues to stress consumer and installment
lending, shorter-term (15 year and under) fixed rate mortgage loans, and
adjustable mortgages.
Provision for Loan Losses. The provision for loan losses is a result of
management's periodic analysis of the Company s loans and the adequacy of its
allowance for loan losses. During the three month period ended June 30, 1996,
no provision was taken against earnings to increase the allowance for loan
losses. For the nine month period $356,500 had been added to the reserve in
connection with the bankruptcy of a major commercial borrower.
The Company adjusts its allowance in accordance with its Classified Assets
Policy. The Company believes it has taken an appropriate approach toward
reserve levels, consistent with the risk inherent in the Company's loan
portfolio, its current level of reserves, the economy, real estate values, and
interest rates. The Company has had an extremely low level of loan losses
during its history, and therefore also considers the loss experience of similar
portfolios in comparable lending markets. Federal regulators may also require
additional reserves as a result of their examinations of the Company.
Accordingly, the calculation of the adequacy of the allowance is not solely
based directly on the level of nonperforming assets at any one time. No
assurance can be made that future losses will not exceed the estimated amounts,
thereby adversely affecting future results of operations. As of June 30,
1996, the Bank s allowance for loan losses was $53,000 compared to $434,000
the previous quarter and a reserve one year ago of $77,000. The decrease in
the allowance was the result of a $381,000 charge-off against the loans of the
commercial borrower described above. As of June 30, 1996, the Bank s non-
performing assets were $278,000, or 0.64% of total assets, compared with
$114,000, or 0.27% of total assets as of September 30, 1995. The increase in
nonperforming assets included $111,000 of autos repossessed in connection
with the bankruptcy of a commercial borrower. The allowance for loan losses
was $53,000 as of June 30, 1996, which represents 31.7% of nonperforming loans
or 19.6% of nonperforming assets (including $111,000 of nonperforming autos)
and 0.19% of total loans.
- - - - -10-
<PAGE>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
(continued)
Noninterest Income. Noninterest income increased $15,000 or 39.1%, to $55,000
in the most recent quarter compared to $40,000 during the same quarter in 1995.
For the nine months ended June 30, 1996 noninterest income was $125,000, an
increase of $30,000 or 32%, compared to the same period a year earlier. The
increase was largely due to a non-recurring gain from the sale of assets by the
Bank s data processor.
Noninterest Expense. Total noninterest expense increased $24,000 or 9.8%, to
$270,000 for the latest quarter compared to $246,000 the same quarter a year
ago. Noninterest expense increased $109,000 or 15.1% to $826,000 for the nine
month period ended June 30, 1996 compared to the same period one year ago. The
increase was primarily the result of higher compensation and benefit expense,
due to higher medical insurance expense and the addition of one new full time
employee, and higher professional fees associated with doing business as a
public company.
Income Tax Expense. Income tax expense decreased to $5,000 for the most recent
nine months compared to $177,000 for the same period in 1995. The reduced
expense is the result of the lower income for the nine months.
Liquidity and Capital Requirements The Company s main sources of funds are
deposits, loan and investment repayments, fees and service charges, and FHLB
advances. Federal regulations require the Bank to maintain cash and eligible
investments in an amount equal to at least 5% of customer accounts and short-
term borrowings to assure its ability to meet demands for withdrawals and
repayments of short-term borrowings. As of June 30, 1996, the Bank s liquidity
ratio was 18.08%, which is well above the regulatory requirements. The Bank
uses its capital resources to meet ongoing commitments, to fund maturing
certificates of deposit and deposit withdrawals, to invest, to fund existing
and future loan commitments, to maintain liquidity, and to meet operating
expenses. The Bank anticipates it will have sufficient funds to meet current
loan commitments. At June 30, 1996 the Bank had commitments outstanding to
extend credit of $1,128,000. The Company had $7.2 million of certificates
of deposit maturing in 12 months or less, the majority of which the Company
anticipates will rollover into new certificates of deposit. Management believes
loan repayments and other sources of funds will be adequate to meet the Bank s
foreseeable liquidity needs. FHLB advances may be used to take advantage of
investment opportunities, but are not relied upon in the regular course of
business.
The Bank is required to maintain specific amounts of regulatory capital
pursuant to federal regulations. The following table presents the capital
position at June 30, 1996 relative to the regulatory capital requirements.
- - - - -11-
<PAGE>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
(continued)
<TABLE>
<CAPTION>
Amount
(in thousands) Percent of Assets
<S> <C> <C>
Tangible Capital $ 4,389 10.20%
Tangible Capital Requirement 646 1.50
Excess $ 3,743 8.70%
Core Capital $ 4,389 10.20%
Core Capital Requirement 1,291 3.00
Excess $ 3,098 7.20%
Total Capital (Core & Supple.) $ 4,440 21.40%
Risk-Based Capital Requirement 1,660 8.00
Excess $ 2,780 13.40%
Regulatory Developments. The deposits of savings institutions such as the Bank
are presently insured by the Savings Association Insurance Fund (the SAIF),
which together with the Bank Insurance Fund (the BIF) are the two insurance
funds administered by FDIC. Federal law requires that the FDIC maintain
reserves of at least 1.25% of insured deposits at both the SAIF and the BIF, up
to applicable limits. The reserves are funded through the payment of insurance
premiums by the insured institution members of each fund. The BIF reached this
level during 1995 enabling the FDIC to reduce BIF insurance premiums to a
range of 0.04% to 0.27% of deposits for the second half of 1996 (as compared to
the previous range of 0.23% to 0.31 % of deposits for both BIF and SAIF insured
institutions). Effective in January, 1996, the FDIC again revised the premium
schedule for BIF insured banks to provide for a range of 0% to 0.23% of
deposits depending on the institution s capital level and other factors. As a
result, BIF members generally pay lower premiums than SAIF members. While the
magnitude of the competitive advantage of BIF-insured institutions and its
impact on the Bank s results of operations cannot be determined at this time,
the decrease in BIF premiums could place the Bank and other SAIF members at
a material competitive disadvantage. The Bank currently qualified for the
minimum SAIF premium level of 0.23% deposits.
Federal legislation, which has been proposed in various forms, provides for a
one-time assessment (in an amount sufficient for the SAIF to achieve the 1.25%
reserve ratio) to be imposed on all SAIF-insured deposits, including those held
by commercial banks, and for a portion of BIF deposit insurance premiums to be
used to pay the Financing Corporation bond interest. If a requirement were
implemented as of March 31, 1995 for the Bank to pay a one-time assessment
equal to 0.90% (the highest proposal considered likely at this time) of SAIF
assessable deposits, the amount of such assessment would have been
approximately $181,000, net of taxes. The final form of any such legislation
has been subject of continuing negotiation and cannot be assured. If the
legislation is enacted during the current Congressional session,
- - - - -12-
<PAGE>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
(concluded)
it is anticipated the assessment would be payable in 1996. Accordingly, this
special assessment would significantly increase noninterest expense and
adversely affect the Company s results of operations. Depending on the Bank s
capital level and supervisory rating, and assuming (although there can be no
assurance) that the insurance premium levels for BIF and SAIF members are again
equalized, deposit insurance premiums could decrease significantly for future periods.
As part of the legislation, Congress is considering requiring all federal
thrift institutions, such as the Bank, to either convert to a national bank
or a state-chartered depository institution by January 1, 1998. The OTS also
would be abolished and its functions transferred among the other federal
banking regulators. Certain aspects of the legislation remain to be resolved
and therefore no assurance can be given as to whether or in what form the
legislation will be enacted or its affect on the Company and the Bank.
Congress has passed a bill, which is expected to be signed by the President
in September, 1996, which will require the recapture of a portion of the Bank s
tax bad debt reserve, which is approximately $133,000 at June 30, 1996. The
recapture would occur over a six-year period and would begin with the Bank s
fiscal year ending September 30, 1997.
- - - - -13-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit 27: Financial Data Schedule
B. 8-K: None
- - - - -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 BUILDING BANCORP, INC.
Registrant
Date: _8/14/96___________________ \s\Bruce A. Beesley
Bruce A. Beesley, President and Chief
Executive Officer (Duly Authorized Officer)
Date: _8/14/96___________________ \s\Debra K. Shields
Debra K. Shields, Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
- - - - -15-
<PAGE>
Exhibit Index
Exhibit 27: Financial Data Schedule
- - - - -16-
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 5538843
<INT-BEARING-DEPOSITS> 1482871
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6811779
<INVESTMENTS-CARRYING> 504360
<INVESTMENTS-MARKET> 509893
<LOANS> 27694240
<ALLOWANCE> 53000
<TOTAL-ASSETS> 43134989
<DEPOSITS> 32715347
<SHORT-TERM> 360821
<LIABILITIES-OTHER> 113876
<LONG-TERM> 3930153
0
0
<COMMON> 3317
<OTHER-SE> 6011475
<TOTAL-LIABILITIES-AND-EQUITY> 43134989
<INTEREST-LOAN> 1818722
<INTEREST-INVEST> 117191
<INTEREST-OTHER> 459737
<INTEREST-TOTAL> 2395650
<INTEREST-DEPOSIT> 1126142
<INTEREST-EXPENSE> 1309640
<INTEREST-INCOME-NET> 1086010
<LOAN-LOSSES> 356500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 826881
<INCOME-PRETAX> 27743
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4912
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
<YIELD-ACTUAL> .07
<LOANS-NON> 166000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 77000
<CHARGE-OFFS> 383000
<RECOVERIES> 2600
<ALLOWANCE-CLOSE> 53000
<ALLOWANCE-DOMESTIC> 37000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 16000
</TABLE>
