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, 2000
-------------
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding
------- ------------
Common Stock 296,660 as of August 13, 2000
Transitional Small Business Disclosure Format (check one):
{ } Yes {X} No
<PAGE>
HOME BUILDING BANCORP, INC.
INDEX
<TABLE>
Part I. Financial Information Page
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition at June 30, 2000 1
and September 30, 1999
Consolidated Statements of Operations for the three and nine months
ended June 30, 2000 and 1999 2
Consolidated Statements of Comprehensive Income/Loss for the three
and nine months ended June 30, 2000 and 1999 3
Consolidated Statements of Cash Flows for the nine months ended
June 30, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations
Part II. Other Information 13
Signatures 14
Index of Exhibits 15
</TABLE>
<PAGE>
Home Building Bancorp, Inc.
Washington, Indiana
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
June 30, Sept. 30,
2000 1999
------- ---------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,545,979 $ 1,247,958
Interest-bearing deposits with banks 2,509,720 4,760,057
Securities available for sale 4,196,901 4,634,094
Securities held to maturity, fair value of $78,444
at June 30, and $129,697 at Sept. 30 79,045 129,362
Loans receivable, net of allowance for loan losses of
$88,140 at June 30, and $86,288 at Sept. 30 37,017,195 36,842,618
Accrued interest receivable 247,607 251,030
Insurance receivable 298,722 -
Premises and equipment 730,072 744,516
Other assets 283,158 277,436
---------------- ----------------
Total assets $ 46,908,399 $ 48,887,071
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Savings and NOW deposits $ 10,481,272 $ 11,190,073
Other time deposits 25,105,314 24,398,525
-------------- --------------
Total deposits 35,586,586 35,588,598
-------------- --------------
Advances from Federal Home Loan Bank 4,677,863 6,677,863
Accrued expenses and other liabilities 418,312 459,888
--------------- --------------
Total liabilities 40,682,761 42,726,349
-------------- -------------
Shareholders' equity:
Common stock, $.01 par value, 1 million shares authorized,
331,660 issued 3,317 3,317
Additional paid-in capital 3,097,219 3,098,774
Treasury stock, 35,000 shares at cost (605,000) (605,000)
Retained earnings 3,906,307 3,855,608
Accumulated other comprehensive income (65,616) (37,946)
Unearned ESOP & recognition and retention shares (110,589) (154,031)
--------------- ---------------
Total shareholders' equity 6,225,638 6,160,722
--------------- ---------------
Total liabilities and shareholders' equity $ 46,908,399 $ 48,887,071
============== ==============
</TABLE>
See accompanying notes.
-1-
<PAGE>
<TABLE>
<CAPTION>
Home Building Bancorp, Inc.
Washington, Indiana
Consolidated Statements of Operations
Three months ended Nine months ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $ 674,496 $ 681,355 $2,095,288 $ 2,020,169
Investments 35,243 34,484 101,564 89,100
Mortgage-backed securities 41,072 47,829 128,184 161,207
Deposits with other banks 40,677 82,595 153,165 217,546
---------- --------- ---------- ---------
Total interest income 791,488 846,263 2,478,201 2,488,022
--------- --------- --------- ---------
Interest expense:
Deposits 355,177 369,695 1,093,932 1,106,410
Other borrowed funds 77,692 85,329 243,552 258,047
----------- --------- --------- ---------
Total interest expense 432,869 455,024 1,337,484 1,364,457
---------- --------- --------- ---------
Net interest income 358,619 391,239 1,140,717 1,123,565
Provision for loan losses - - 3,500 15,000
-------------- ------------ ----------- ----------
Net interest income after provision for loan losses 358,619 391,239 1,137,217 1,108,565
---------- --------- --------- ---------
Noninterest income:
Gain on sale of assets 12 12 43 10,396
Customer service fees 37,773 46,156 91,558 135,539
----------- ----------- ----------- ----------
Total other income 37,785 46,168 91,601 145,935
----------- ----------- ----------- ----------
Noninterest expenses:
Salaries and employee benefits 157,659 159,279 485,184 469,715
Severance agreement expense 106,189 - 106,189 -
Occupancy and equipment 33,064 34,948 106,269 107,382
Deposit insurance premium 1,785 5,188 9,005 14,967
Computer expense 15,368 9,961 48,210 44,337
Service fees 14,954 14,794 44,809 46,295
Advertising expense 13,820 16,223 39,759 44,207
Professional fees 48,818 9,996 104,299 43,504
Other expense 30,155 30,644 103,947 91,708
---------- ---------- ---------- ----------
Total other expenses 421,812 281,033 1,047,671 862,115
--------- --------- --------- ---------
Income before income taxes (25,408) 156,374 181,147 392,385
Income tax expense (13,378) 47,073 63,699 121,962
------------ ----------- ----------- ----------
Net income $ (12,030) $ 109,301 $ 117,448 $ 270,423
============ ========== ========== ==========
Basic earnings per share $ (0.04) $ 0.39 $ 0.41 $ 0.96
============= ============ ============ ============
Weighted average shares outstanding 285,598 281,056 284,478 283,157
========= ========= ========= =========
Diluted earnings per share $ (0.04) $ 0.39 $ 0.41 $ 0.96
============= ============ ============ ============
Diluted weighted average shares outstanding 285,598 281,056 284,478 283,157
========= ========= ========= =========
</TABLE>
See accompanying notes.
-2-
<PAGE>
<TABLE>
<CAPTION>
Home Building Bancorp, Inc.
Washington, Indiana
Consolidated Statements of Comprehensive Income/Loss
Three months ended Nine months ended
June 30, June 30,
2000 1999 2000 1999
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss) $ (12,030) $ 109,301 $ 117,448 $ 270,423
Other comprehensive income, net of income tax:
Unrealized holding gains and (losses) (3,073) (35,429) (27,670) (46,901)
----------- ----------- ---------- -----------
Comprehensive income/(loss) $ (15,103) $ 73,872 $ 89,778 $ 223,522
=========== =========== ========== ==========
</TABLE>
See accompanying notes.
-3-
<PAGE>
<TABLE>
<CAPTION>
Home Building Bancorp, Inc.
Washington, Indiana
Consolidated Statements of Cash Flows
Nine months ended June 30,
2000 1999
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 117,448 $ 270,423
Adjustments to reconcile net income to net cash
provided by (used by) operating activities:
Depreciation and amortization 26,208 29,040
Non cash compensation 41,887 54,504
Other gains and losses, net - (10,396)
Net realized gains on available-for-sale securities - -
Change in accrued interest receivable 3,423 3,464
Change in accrued expenses and other liabilities (41,575) (70,977)
Change in other assets 13,925 (109,867)
Provision for loan losses 3,500 15,000
------------- ----------
Net cash provided by operating activities 164,816 181,191
------------- ----------
Cash flows from investing activities:
Net change in interest-bearing deposits with banks 2,250,337 (1,532,698)
Purchases of available-for-sale securities (96,513) (1,300,127)
Proceeds from maturities of available-for-sale securities 486,389 2,035,400
Proceeds from sales of available-for-sale securities - -
Proceed from maturities of held-to-maturity securities 50,317 75,702
Net change in loans (476,800) (3,363,890)
Net purchases of premises and equipment (11,764) (15,417)
------------- ------------
Net cash used in investing activities 2,201,966 (4,101,030)
------------- -----------
Cash flows from financing activities:
Net change in deposits (2,012) 3,324,139
Purchase of 15,000 shares of treasury stock - (260,000)
Proceeds from Federal Home Loan Bank advances (2,000,000) 500,000
Dividends paid (66,749) (66,747)
-------------- -----------
Net cash provided by financing activities (2,068,761) 3,497,392
-------------- -----------
Net change in cash and due from banks 298,021 (422,447)
Cash and due from banks at beginning of period 1,247,958 1,366,761
------------- ------------
Cash and due from banks at end of period $ 1,545,979 $ 944,314
============= ============
Cash paid for:
Interest $ 1,367,507 $ 1,370,849
============ ============
Income taxes $ 162,117 $ 220,234
============= ============
</TABLE>
See accompanying notes.
-4-
<PAGE>
Home Building Bancorp, Inc.
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
Note 1: Basis of Presentation
The consolidated financial statements include the accounts of Home Building
Bancorp, Inc. (the "Company"), Home Building Savings Bank, FSB (the "Bank"), and
the Bank's subsidiary. All significant inter-company balances and transactions
have been eliminated in consolidation. In the opinion of management of the
Company, 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 Company's most recent annual financial statements and
footnotes included in the annual report of Home Building Bancorp, Inc. dated
September 30, 1999. 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: Earnings Per Share
Basic earnings/(loss) of $(0.04) per share for the three month period and $0.41
for the nine month period ended June 30, 2000, were computed by dividing net
income by the weighted average number of shares outstanding during the quarter,
less average unearned Employee Stock Ownership Plan ("ESOP") and Recognition and
Retention Plan ("RRP") shares. Diluted earnings per share give effect to all
dilutive potential common shares that were outstanding during the period.
Earnings, assuming dilution, for the most recent three-month period were $(0.04)
per share and $0.41 for the nine month period ended June 30, 2000. A
reconciliation of both numerators and denominators of the per share calculations
follows:
<TABLE>
<CAPTION>
Income Shares Per-Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
FOR THE THREE MONTHS ENDED JUNE 30, 2000
----------------------------------------
BASIC EPS,
Income available to common shareholders $ (12,030) 285,598 $ (0.04)
Effect of dilutive securities:
Incentive stock option plan shares -
DILUTED EPS
Income available to common shareholders+
assumed conversions $ (12,030) 285,598 (0.04)
FOR THE NINE MONTHS ENDED JUNE 30, 2000
---------------------------------------
BASIC EPS,
Income available to common shareholders $ 117,448 284,478 0.41
Effect of dilutive securities:
Incentive stock option plan shares -
DILUTED EPS
Income available to common shareholders +
assumed conversions $ 117,448 284,478 0.41
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Home Building Bancorp, Inc.
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
Note 2: Earnings Per Share, continued
FOR THE THREE MONTHS ENDED JUNE 30, 1999
----------------------------------------
<S> <C> <C> <C>
BASIC EPS,
Income available to common shareholders $ 109,301 281,056 0.39
Effect of dilutive securities:
Incentive stock option plan shares -
DILUTED EPS
Income available to common shareholders +
assumed conversions $ 109,301 281,056 0.39
FOR THE NINE MONTHS ENDED JUNE 30, 1999
---------------------------------------
<S> <C> <C> <C>
BASIC EPS,
Income available to common shareholders $ 270,423 283,157 0.96
Effect of dilutive securities:
Incentive stock option plan shares -
DILUTED EPS
Income available to common shareholders +
assumed conversions $ 270,423 283,157 0.96
</TABLE>
Note 3: Allowance for Loan Losses and Loan Loss Provision
The allowance for loan losses increased $2,000 to $88,000 for the nine-month
period ended June 30, 2000. Activity in the allowance for loan losses was as
follows:
<TABLE>
<CAPTION>
For the nine months ended June 30,
2000 1999
------- --------
<S> <C> <C>
Beginning $ 86,288 $ 92,249
Provision 3,500 15,000
Charge-offs (1,744) (24,277)
Recoveries 96 3,133
------------ -----------
Ending $ 88,140 $ 86,105
========== ==========
</TABLE>
Note 4: Insurance Receivable
During December of 1999, management discovered an employee fraud involving
approximately $350,000 in fictitious loans on savings accounts. Of this amount,
$340,000, combined with various professional fees was initially recorded as an
insurance receivable, because management believes the loss is covered by the
Company's fidelity bond. The difference of $10,000, representing the deductible
of the Bank's fidelity bond, was recorded as an other noninterest expense in
December, 1999. Management, working with counsel, has submitted a claim to its
bond carrier and is awaiting their determination.
-6-
<PAGE>
Home Building Bancorp, Inc.
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
Note 4: Insurance Receivable, continued
Based on initial consultations with the insurance carrier, management wrote off
an additional $52,000 during the quarter ended June 30, 2000. This amount
represents professional fees and interest on the loans, which may not be
reimbursed by the Bank's fidelity bond. The defalcation took place over a period
of six years, but was not prevented or detected earlier because it did not
result in any cash shortages, accounting imbalances, or from the usurpation of
duties from other personnel. The Bank now uses the same procedures for
origination and accounting of loans on savings accounts as on any other type of
secured installment loan.
-7-
<PAGE>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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 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. At June 30, 2000, the
Company had no significant assets other than its equity investment in the bank's
stock, cash, investments, and a loan to the Bank's Employee Stock Ownership Plan
("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 mortgage loans, automobile and
consumer loans, and to a lesser extent commercial, multifamily and construction
real estate loans. The Bank also invests in US government and agency obligations
and may invest in other permissible investments.
The Bank'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 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 Bank's results of operations are also affected by the provision for
loan losses and the level of noninterest income and expenses. General economic
conditions, the monetary and fiscal policies of federal agencies, and the
policies of agencies that regulate financial institutions also affect the
operating results of the Bank. Interest rates on competing investments and
general market rates of interest influence the Bank's cost of funds. The demand
for real estate loans and other types of loans influence lending activities,
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
During the nine months ended June 30, 2000, total assets decreased approximately
$2.0 million to $46.9 million from $48.9 million at September 30, 1999. Cash and
due from banks increased $298,000, while interest-bearing deposits decreased
$2.3 million. Net loans receivable increased $0.2 million, to $37.0 million on
June 30, 2000 from $36.8 million on September 30, 1999. The Company had $4.2
million in securities available for sale and only $79,000 in held to maturity at
June 30, 2000.
Total liabilities decreased by approximately $2.0 million during the nine-month
period, to $40.7 million at June 30, 2000 from $42.7 million at September 30,
1999. The decrease of $2.0 million was related to the payoff of two Federal Home
Loan Bank advances.
-8-
<PAGE>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
RESULTS OF OPERATIONS:
COMPARISON OF THE THREE AND NINE MONTHS ENDED JUNE 30, 2000 AND 1999.
GENERAL. The Company recorded a net loss of $12,000 for the quarter and a profit
of $117,000 for the nine months ended June 30, 2000, compared to net profits of
$109,000 and $270,000 for the same periods in 1999. Results of operations for
the third quarter were impacted by lower noninterest income and higher
noninterest expense. Year to date, these same trends were apparent. Lower
noninterest income from the Bank's investment services subsidiary, higher
professional fees related to the employee fraud discovered in December 1999 and
severance pay for the former CEO were the primary drivers of these changes.
INTEREST INCOME. Total interest income decreased $55,000, or 6.5%, to $791,000
for the three months ended June 30, 2000, compared to the same period last year.
Interest income on loans decreased $7,000 for the three months ended June 30,
2000 compared to a year ago. Loan interest income is up $75,000, 3.7%, year to
date but was reduced this quarter by the reversal of $40,000 of interest on the
fraudulent loans discussed in Note 4. Lower volumes of mortgage-backed
securities and deposits with other banks reduced interest from these sources by
a total of $48,000 for the most recent quarter compared to the same quarter a
year ago. The sources of interest income reflect the changes in the asset mix,
with a higher proportion of assets in loans and less in securities. For the nine
month period interest income decreased $10,000, or 0.4%, to $2,478,000 compared
to $2,488,000 during the first nine months of fiscal year 1999.
INTEREST EXPENSE. Total interest expense decreased $22,000, or 4.9%, to $433,000
for the most recent quarter compared to the same quarter a year ago. Interest on
deposits decreased $15,000 due to $3.2 million in public fund monies that
matured during the first quarter of the current fiscal year. Interest expense on
FHLB advances declined due to the $2.0 million payment on funds borrowed.
The weighted average cost of deposits for the year to date at June 30, 2000 was
4.2%, the same as for 1999 and the overall cost of funds, including FHLB
advances, was 4.4% for the nine month period ended June 30, 2000 also the same
as in 1999. These numbers reflect the Bank's ability to keep deposit rates
stable despite rising interest rates during the quarter. The Bank is able to
compete aggressively for savings funds when adequate spreads on loans or
investments are available. FHLB advances have been an effective liability
management tool in the past as well.
NET INTEREST INCOME. Net interest income, before provision for loan losses,
decreased $33,000, or 8.3%, to $359,000 for the quarter compared to the same
quarter a year ago. For the nine month period ended June 30, 2000, average
interest-earning assets were 108.52% of average interest bearing liabilities.
Local demand for mortgage loans has declined during the nine-month period as
rates have increased. Net loans receivable have remained stable at approximately
$37.0 million.
-9-
<PAGE>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
NET INTEREST INCOME, CONTINUED
Total deposits during the nine-month period also remained stable at $35.6
million. The Bank's advances from the FHLB declined by $2.0 million due a
scheduled maturity. Additionally, the Company regularly bids on short-term
funds, such as short-term public funds. At any time the Company could decline to
bid on such funds, and allow them to be withdrawn if acceptable spreads are not
available. The Company's liabilities are generally shorter in term and subject
to re-pricing more frequently than assets.
The Company continues to stress consumer and installment lending, shorter-term
(15 years and under) fixed rate mortgage loans, and adjustable rate mortgages.
Investments involve shorter-term and adjustable securities to respond to
changing rates. However, given the higher proportion of fixed rate assets, the
Company has more downside exposure in a rising rate environment. Based on the
latest available OTS Interest Rate Risk Exposure Report, the net present value
of the Bank, as a percent of assets in the +200bp scenario, would decline 3.1%.
It would increase 1.8% assuming a -200bp scenario.
NONPERFORMING ASSETS AND PROVISION FOR LOAN LOSSES. The provision for loan
losses is a result of management's periodic analysis of the adequacy of the
Company's allowance for loan losses. During the three-month period ended June
30, 2000 no additional provision was recorded and net charge-offs were only
$2,000 year to date. 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 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 require additional
reserves as a result of their examinations of the Company, but have not done so.
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, 2000
the Company's allowance for loan losses was $88,000 compared to $86,000 on
September 30, 1999. Over the nine-month period $1,700 in losses, net of
recoveries, were recognized and $3,500 in additions were made to the loan loss
reserve.
As of June 30,2000, the Company's nonperforming assets totaled $267,000, or
0.57% of total assets. At the same date, the Company's ratio of allowance for
loan losses to nonperforming assets was 33.0%.
NONINTEREST INCOME. Noninterest income decreased $8,000, or 18.2%, to $38,000
for the most recent quarter compared to the same quarter a year ago. For the
nine-month period noninterest income decreased $54,000, or 37.2%, to $92,000 for
the period. During both the most recent quarter and year to date the gains from
sale of assets and customer service fees decreased compared to a year ago. The
Company does not depend on the regular or periodic sale of assets for income,
but during the quarter and the nine-month period in the 1999 fiscal year, some
investment securities were called at profit to the Bank. Customer services fees
decreased $44,000, or 32.5%, to $92,000 for the nine month period ended June 30,
2000 compared to $136,000 for the same period a year ago. Of this decline,
$34,000, 77.3%, resulted from lower fees from investment sales generated by the
Bank's investment advisory subsidiary.
-10-
<PAGE>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(continued)
NONINTEREST EXPENSE. Total noninterest expense increased $141,000, or 50.1%, to
$422,000 for the latest quarter compared to $281,000 for the same quarter a year
ago. The increases were due to an employee severance agreement and higher
professional fees and other expense. For the nine months noninterest expense
increased $186,000, 21.5%, to $1,048,000 compared to $862,000 for the same
period a year ago. The increase was due to an employee severance agreement and
higher salaries and benefits, professional expenses and other expenses. Compared
to the same period a year ago the Bank has added a full time commercial loan
officer. In addition, during December 1999, management discovered an employee
fraud and the Company has incurred higher professional fees related to this
matter.
During April 2000, the Company entered into a separation and severance agreement
with its Chief Executive Officer. Pursuant to the terms of the agreement, he
will continue to receive salary and benefits for a period of time. In April
2000, the Company accrued and expensed approximately $106,000 related to this
agreement. This agreement accounts for 75.2% of the noninterest expense increase
for the quarter and 57.0% of the increase, year to date.
INCOME TAX EXPENSE. An income tax benefit of $13,000 was recognized for the most
recent quarter compared to an expense of $47,000 for the same quarter a year
ago. For the nine months ended June 30, 2000, tax expense was $64,000 compared
to $122,000 for the period a year ago. The changing expense/(benefit) reflects
levels of income before tax and changes in effective tax rate.
LIQUIDITY AND CAPITAL REQUIREMENTS. Home Building's main sources of funds are
deposits, loan and investment repayments, fees and service charges, and Federal
Home Loan Bank (FHLB) advances. Federal regulations require the Bank to maintain
cash and eligible investments at levels that assure its ability to meet demands
for withdrawals and repayments of short-term borrowings. As of June 30, 2000,
the Bank had cash and due from banks, deposits, and securities available for
sale equal to 20.5% of total deposits and FHLB advances.
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, 2000, the Bank had outstanding commitments
to extend credit totaling $450,000. Management believes loan repayments,
deposits, 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, or as an alternative source of liquid funds, but are
not relied upon in the regular course of business.
Home Building Savings Bank is required to maintain specific amounts of
regulatory capital pursuant to federal regulations. The table below presents the
capital position at June 30, 2000, relative to the regulatory capital
requirements.
-11-
<PAGE>
<TABLE>
<CAPTION>
Home Building Bancorp, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
(concluded)
LIQUIDITY AND CAPITAL REQUIREMENTS, CONTINUED
Amount
(in thousands) Percent of Assets
-------------- -----------------
<S> <C> <C>
Tier 1 Core Capital $ 4,851 10.44%
Core Capital Requirement $ 1,859 4.00%
Excess $ 2,992 6.44%
Total Capital $ 4,939 18.70%
Risk-Based Capital Requirement $ 2,113 8.00%
Excess $ 2,826 10.70%
</TABLE>
YEAR 2000
Home Building Savings Bank has not experienced any data processing or other
operational problems connected with the Year 2000 event. Moreover, management is
not aware of any significant operational problems among the Bank's correspondent
institutions, data processing providers, or others vendors, which would have an
effect on the Bank's operations. The Bank did not experience any noticeable
deposit withdrawals or other activity by Bank's customers that had any impact on
operations.
FORWARD-LOOKING STATEMENTS
When used in this Quarterly Report on Form 10-QSB or future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases or other public or shareholder communications, or in oral statements
made with the approval of an authorized executive officer, the words or phrases
"will likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project", "believe" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, which speak only as
of the date made, and to advise readers that various factors including regional
and national economic conditions, changes in levels of market interest rates,
credit risks of lending activities, and competitive and regulatory factors could
affect the Company's financial performance and could cause the Company's actual
results for future periods to differ materially from those anticipated or
projected.
The Company does not undertake and specifically disclaims any obligation to
publicly release the result of any revisions, which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedules (electronic filing only)
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<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: 8/13/00 /s/ John G. Graham
------------------------
John B. Graham, President and Chief
Executive Officer (Duly Authorized Officer)
Date: 8/13/00 /s/ Debra K. Shields
-------------------------
Debra K. Shields, Vice President
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<PAGE>
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
27 Financial Data Schedules (electronic filing only) For
nine month period ended June 30, 2000
