SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-26570
Harrodsburg First Financial Bancorp, Inc.
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 61-1284899
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
104 South Chiles Street, Harrodsburg, Kentucky 40330-1620
- ---------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (606) 734-5452
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 ninety days. Yes |X| No | |
As of August 5, 1997, 2,024,756 shares of the registrant's common stock were
issued and outstanding.
Page 1 of 16 Pages Exhibit Index at Page N/A
<PAGE>
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997
(unaudited) and September 30, 1996.............................. 3
Consolidated Statements of Income for the Three-Month
Periods Ended June 30, 1997 and 1996 (unaudited)
and the Nine-Month Periods Ended June 30, 1997
and 1996 (unaudited)............................................ 4
Consolidated Statements of Cash Flows for the Nine-Month
Periods Ended June 30, 1997 and 1996 (unaudited)................ 5
Notes to Consolidated Financial Statements......................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................16
Item 2. Changes in Securities..............................................16
Item 3. Defaults Upon Senior Securities....................................16
Item 4. Submission of Matters to a Vote of Security Holders................16
Item 5. Other Information..................................................16
Item 6. Exhibits and Reports on Form 8-K...................................16
SIGNATURES
2
<PAGE>
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
As of As of
June 30, September 30,
ASSETS 1997 1996
------------------ ------------------
(unaudited)
<S> <C> <C>
Cash and due from banks $ 679,529 $ 834,621
Interest bearing deposits 12,460,067 14,230,056
Certificates of deposit 2,500,000
Available-for-sale securities 2,698,080 1,881,429
Held-to-maturity securities 11,537,582 10,502,766
Loans receivable, net 80,218,711 77,502,336
Accrued interest receivable 610,977 675,433
Premises and equipment, net 634,357 657,920
Other assets 110,077 168,113
------------------ ------------------
Total assets $ 108,949,380 $ 108,952,674
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 78,405,212 $ 76,946,210
Advance payments by borrowers for taxes and insurance 50,265 68,534
Income taxes payable 1,126,742 719,402
Dividends payable 391,633
Other liabilities 33,530 604,906
------------------ ------------------
Total liabilities 79,615,749 78,730,685
------------------ ------------------
Stockholders' equity:
Common stock, $0.10 par value, 5,000,000 shares authorized;
2,182,125 shares issued and outstanding 218,213 218,213
Additional paid-in capital 21,061,733 21,001,572
Retained earnings, substantially restricted 10,655,626 10,229,074
Net unrealized appreciation on available-for-sale securities 1,730,915 1,191,925
Treasury stock, 157,369 and 49,392 shares at cost as of
June 30, 1997 and September 30, 1996, respectively (2,790,826) (789,495)
Unallocated employee stock ownership plan (ESOP) shares (1,542,030) (1,629,300)
------------------ ------------------
Total stockholders' equity 29,333,631 30,221,989
------------------ ------------------
Total liabilities and stockholders' equity $ 108,949,380 $ 108,952,674
================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
---------------------------
<TABLE>
<CAPTION>
For the Three-Month Periods For the Nine-Month Periods
Ended June 30 Ended June 30
------------------------------- ------------------------------
1997 1996 1997 1996
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest income:
Interest on loans $ 1,575,061 $ 1,479,275 $ 4,662,224 $ 4,441,402
Interest and dividends on securities 198,848 128,798 580,301 264,883
Other interest income 161,381 309,749 505,158 1,056,676
-------------- ------------- ------------- -------------
Total interest income 1,935,290 1,917,822 5,747,683 5,762,961
-------------- ------------- ------------- -------------
Interest expense:
Interest on deposits 960,804 973,010 2,849,361 2,936,401
-------------- ------------- ------------- -------------
Net interest income 974,486 944,812 2,898,322 2,826,560
Provision for loan losses 11,000 -0- 11,000 -0-
-------------- ------------- ------------- -------------
Net interest income after provision
for loan losses 963,486 944,812 2,887,322 2,826,560
-------------- ------------- ------------- -------------
Non-interest income:
Loan and other service fees, net 22,280 19,573 54,021 56,058
Other 5,070 5,852 13,757 16,933
-------------- ------------- ------------- -------------
Total non-interest income 27,350 25,425 67,778 72,991
-------------- ------------- ------------- -------------
Non-interest expense:
Compensation and benefits 232,040 200,710 686,658 612,035
Occupancy expenses, net 32,320 30,357 94,392 90,527
Federal and other insurance premiums 13,363 48,902 65,468 163,739
Data processing expenses 24,212 21,486 75,762 69,047
State franchise tax 23,587 24,143 71,317 68,894
Other operating expenses 89,826 67,030 297,069 259,511
-------------- ------------- ------------- -------------
Total non-interest expense 415,348 392,628 1,290,666 1,263,753
-------------- ------------- ------------- -------------
Income before income tax expense 575,488 577,609 1,664,434 1,635,798
Income tax expense 196,994 200,591 570,047 567,775
-------------- ------------- ------------- -------------
Net income $ 378,494 $ 377,018 $ 1,094,387 $ 1,068,023
============== ============= ============= =============
Earnings per share $ .20 $ 0.19 $ .58 $ 0.53
============== ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
---------------------------
<TABLE>
<CAPTION>
For the Nine-Month Periods
Ended June 30,
------------------------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,094,387 $ 1,068,023
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 11,000 -0-
ESOP benefit expense 145,103 121,433
Provision for depreciation 48,219 43,740
Amortization of loan fees (31,672) (46,594)
Amortization of investment premium 753
FHLB stock dividend (64,300) (59,400)
Change in:
Interest receivable 64,456 (35,330)
Interest payable 756 (1,419)
Accrued liabilities (569,805) (33,765)
Prepaid expense 58,036 (3,782)
Income taxes payable 129,679 77,236
-------------- -------------
Net cash provided by operating activities 886,612 1,130,142
-------------- -------------
Cash flows from investing activities:
Net (increase) decrease in loans (2,695,703) (3,606)
Proceeds from certificates of deposit 2,500,000 2,500,000
Purchase of held-to-maturity securities (1,000,885) (7,208,849)
Principle repayments - mortgage back securities 29,616 28,766
Purchase of fixed assets (24,656) (100,534)
-------------- -------------
Net cash (used) by investing activities (1,191,628) (4,784,223)
-------------- -------------
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts (130,697) 924,648
Net increase (decrease) in certificates of deposit 1,589,700 1,027,002
Net increase (decrease) in custodial accounts (18,269) (35,066)
Payment of conversion expenses (365,414)
Purchase of treasury stock (2,001,331) (353,763)
Dividends paid (1,059,468) (401,511)
-------------- -------------
Net cash provided (used) by financing activities (1,620,065) 795,896
-------------- -------------
Increase (decrease) in cash and cash equivalents (1,925,081) (2,858,185)
Cash and cash equivalents, beginning of period 15,064,677 21,990,430
-------------- -------------
Cash and cash equivalents, end of period $ 13,139,596 $ 19,132,245
============== =============
Supplemental Disclosures of cash flow information:
Cash paid for interest on deposits $ 2,848,605 $ 2,937,819
============== =============
Cash paid for income taxes $ 385,000 $ 455,111
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Harrodsburg First Financial Bancorp (the "Company") was formed at the
direction of First Federal Savings Bank of Harrodsburg (the "Bank") to
become the holding company of the Bank upon the conversion of the Bank
from mutual to stock form (the "Conversion"). Since the Conversion,
the Company's primary assets have been the outstanding capital stock
of the Bank, 50% of the net proceeds of the Conversion, and a note
receivable from the Company's Employee Stock Ownership Plan ("ESOP"),
and its sole business is that of the Bank. Accordingly, the
consolidated financial statements and discussions herein include both
the Company and the Bank. The Company was incorporated at the
direction of the Board of Directors of the Bank in June 1995. On
September 29, 1995, the Bank converted from mutual to stock form as a
wholly owned subsidiary of the Company. In conjunction with the
Conversion, the Company issued 2,182,125 shares of its common stock to
the public.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring accruals) necessary
for fair presentation have been included. The results of operations
and other data for the three and nine month periods ended June 30,
1997 are not necessarily indicative of results that may be expected
for the entire fiscal year ending September 30, 1997.
2. Earnings Per Share
Earnings per share for the three and six month periods ended June 30,
1997 amounted to $0.20 per share and $0.58 per share, respectively,
based on weighted average common stock shares outstanding. The
weighted average number of common shares outstanding for the three and
nine month periods ended June 30, 1997 was 1,869,098 and 1,894,989
shares, respectively. Earnings per share for the three and nine month
periods ended June 30, 1996 amounted to $0.19 per share and $0.53 per
share, respectively, based on weighted average common stock shares
outstanding. The weighted average number of common shares outstanding
for the three and nine month periods ended June 30, 1996 was 2,003,280
and 2,006,145 shares, respectively.
3. Dividends
On March 17, 1997, the Board of Directors of the Company authorized
the payment of a cash dividend of $.20 per share to all shareholders
of record on March 31, 1997 payable on April 15, 1997. The total
dividends paid by the Company for the nine months ended June 30, 1997
amounted to $1,059,468.
6
<PAGE>
4. Treasury Stock
Pursuant to the stock repurchase plan approved by the Board of
Directors of the Company on September 16, 1996, the Company
repurchased a total of 157,369 shares at a total price of $2,790,826
during the nine months ended June 30, 1997.
5. Subsequent Event - Employee Benefit Plans
On January 27, 1997 the stockholders of the Company approved the
establishment of the Harrodsburg First Financial Bancorp, Inc. 1996
Stock Option Plan ("Option Plan") and the First Federal Savings Bank
of Harrodsburg Restricted Stock Plan and Trust Agreement ("Restricted
Stock Plan").
Pursuant to the Option Plan, which is effective January 27, 1997,
200,000 authorized but unissued shares of common stock have been
reserved for issuance upon the exercise of options or the grant of
restricted stock to employees and directors of the Company or the
Bank. Effective with the approval of the Option Plan by the
stockholders, stock options were granted for the purchase of 190,000
shares. The options are exercisable at the fair market of the common
stock on the date of the award which was $16.50 per share. All options
are nontransferable and have a maximum term of 10 years.
The objective of the Restricted Stock Plan, which is effective January
27, 1997, is to enable the Bank to attract and retain personnel of
experience and ability in key positions of responsibility. Those
eligible to receive benefits under the Restricted Stock Plan will be
such employees as selected by members of a committee appointed by the
Company's Board of Directors. The Restricted Stock Plan is a
non-qualified plan that will be managed through a separate trust. The
Bank will contribute sufficient funds to the ERP Trust for the
purchase of up to 85,000 shares of common stock. The Company will
recognize an expense for the fair market value of any awards granted
over the period the award is earned.
7
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended June 30, 1997 and 1996
Net Income
Net income increased by $1,000 or .4% for the three months ended June 30, 1997
as compared to the same period in 1996. The net increase of $1,000 was due to an
increase of $30,000 in net interest income, an increase of $2,000 in
non-interest income, a decrease of $3,000 in income tax expense, offset by a
$23,000 increase in non-interest expense and an $11,000 increase in the
provision for loan losses.
Interest Income
Interest income was $1.9 million, or 7.24% of average interest-earning assets,
for the quarter ended June 30, 1997 as compared to $1.9 million, or 7.09% of
average interest-earning assets, for the quarter ended June 30, 1996. Interest
income increased by $17,000 or .9% from 1996 to 1997. The increase in interest
income was due primarily to an increase of 15 basis points in the average rate
earned offset by a $1.3 million decrease in the average balance of interest
earning assets.
Interest Expense
Interest expense was $961,000, or 4.93% of average interest-bearing deposits,
for the quarter ended June 30, 1997 as compared to $973,000, or 5.04% of average
interest-bearing deposits, for the corresponding period in 1996. Interest
expense decreased $12,000 or 1.3% from 1996 to 1997. The decrease in interest
expense was due primarily to an 11 basis point decrease in the average rate paid
on deposits during the period ended June 30, 1997 compared to the corresponding
period in 1996 offset by an increase of $654,000 in the balance of average
interest-bearing liabilities in 1997 compared to 1996.
Provision for Loan Losses
There was an $11,000 provision for loan losses for the quarter ended June 30,
1997 while in the quarter ended June 30, 1996, there was no provision for loan
losses. Management considers many factors in determining the necessary level of
the allowance for loan losses, including an analysis of specific loans in the
portfolio, estimated value of the underlying collateral, assessment of general
trends in the real estate market, delinquency trends, prospective economic and
regulatory conditions, inherent loss in the loan portfolio, and the relationship
of the allowance for loan losses to outstanding loans. At June 30, 1997 the
allowance for loan losses represented .38% of total loans compared to .39% at
June 30, 1996.
There can be no assurance that management will not decide to increase the
allowance for loan losses or that regulators, when reviewing the Bank's loan
portfolios in the future, will not request the Bank to increase such allowance,
either of which could adversely affect bank earnings. Further, there can be no
assurance that the Bank's actual loan losses will not exceed its allowance for
loan losses.
8
<PAGE>
Non-Interest Income
Non-interest income amounted to $27,000 and $25,000 for the quarter ended June
30, 1997 and 1996, respectively. The largest item in non-interest income is
service fees on loan and deposit accounts, which amounted to $22,000 and $20,000
for the quarter ended June 30, 1997 and 1996, respectively. The increase in
non-interest income of $2,000 was primarily due to the increase in income from
late fees on delinquent loans plus an increase in service fees on deposit
transaction accounts.
Non-Interest Expense
Non-interest expense increased $23,000 or 5.8% to $415,000 for the quarter ended
June 30, 1997 compared to $392,000 for the comparable period in 1996.
Non-interest expense was 1.5% of average assets for both periods. The increase
of $23,000 was primarily due to increases of $31,000 in compensation and
benefits, $23,000 in other operating expenses, offset by a decrease of $35,000
in federal and other insurance premiums. The increase of $31,000 in compensation
and benefits was primarily due to normal salary increases and an increase
related to the employee stock option plan due to the increase in the average
price of the stock. The increase of $23,000 in other operating expenses is
related mainly to the increase in franchise taxes for the Company. The decrease
in the federal and other insurance premiums of $35,000 was due to the reduction
of the insurance assessment rate on the Bank's deposits resulting from the
recapitalization of the Savings Association Insurance Fund in 1996.
Income Taxes
The provision for income tax expense amounted to $197,000 and $200,000 for the
quarters ended June 30, 1997 and 1996, respectively, which as a percentage of
income before income tax expense amounted to 34.2% for 1997 and 34.7% for 1996.
Results of Operations for the Nine Months Ended June 30, 1997 and 1996
Net Income
Net income increased by $26,000 or 2.5% for the nine month period ended June 30,
1997 as compared to the same period in 1996. The net increase of $26,000 was due
to an increase of $71,000 in net interest income, offset by an increase in the
provision for loan losses of $11,000, a decrease in non-interest income of
$5,000, an increase in non-interest expenses of $27,000 and an increase in
tax-expense of $2,000 for the nine month period ended June 30, 1997 compared to
the same period in 1996.
Interest Income
Interest income was $5.7 million, or 7.22% of average interest-earning assets,
for the nine month period ended June 30, 1997 as compared to $5.8 million, or
7.18% of average interest-earning assets, for the nine month period ended June
30, 1996. Interest income decreased by $15,000 or 0.3% from 1996 to 1997. The
decrease in interest income was due primarily to a decrease of $845,000 in the
average balance of interest-earning assets during the nine month period ended
June 30, 1997 compared to the nine month period ended June 30, 1996 offset by an
increase of 4 basis points in the average rate earned.
9
<PAGE>
Interest Expense
Interest expense was $2.8 million, or 4.89% of average interest-bearing
deposits, for the nine month period ended June 30, 1997 as compared to $2.9
million, or 5.11% of average interest-bearing deposits, for the corresponding
period in 1996. Interest expense decreased $87,000, or 2.9%, from 1996 to 1997.
The decrease in interest expense was due primarily to 22 basis point decrease in
the average rate paid on deposits during the period ended June 30, 1997 compared
to the corresponding period in 1996 offset by an increase of $1.0 million in the
balance of average interest bearing liabilities in 1997 compared to 1996.
Provision for Loan Losses
There was an $11,000 provision for loan losses during the nine month period
ended June 30, 1997; while in the nine month period ended June 30, 1996, there
was no provision for loan losses. Management considers many factors in
determining the necessary level of the allowance for loan losses, including an
analysis of specific loans in the portfolio, estimated value of the underlying
collateral, assessment of general trends in the real estate market, delinquency
trends, prospective economic and regulatory conditions, inherent loss in the
loan portfolio, and the relationship of the allowance for loan losses to
outstanding loans.
Non-Interest Income
Non-interest income amounted to $68,000 and $73,000 for the nine month period
ended June 30, 1997 and 1996, respectively. The largest item in non-interest
income is service fees on loan and deposit accounts, which amounted to $54,000
and $56,000 for the nine month period ended June 30, 1997 and 1996,
respectively. The decrease in non-interest income of $5,000 was primarily due to
the decrease in income from late fees on delinquent loans.
Non-Interest Expense
Non-interest expense increased $27,000 or 2.1% to $1,291,000 for the nine month
period ended June 30, 1997 compared to $1,264,000 for the comparable period in
1996. Non-interest expense was 1.6% of average assets for both periods. The
increase of $27,000 was primarily due to increases of $75,000 in compensation
and benefits, $38,000 in other operating expenses, offset by a decrease of
$98,000 in federal and other insurance premiums. The increase of $75,000 in
compensation and benefits was primarily due to normal salary increases and an
increase related to the employee stock option plan due to the increase in the
average price of the stock. The increase in other operating expenses was
primarily due to an increase in franchise taxes of the Company. The decrease of
$98,000 in federal and other insurance premiums was due to the reduction of the
insurance assessment rate on the Bank's deposits resulting from the
recapitalization of the Savings Association Insurance Fund in 1996.
Income Taxes
The provision for income tax expense amounted to approximately $570,000 and
$568,000 for the nine month period ended June 30, 1997 and 1996, respectively,
which as a percentage of income before income tax expense amounted to a 34.2%
for 1997 and 34.7% for 1996.
10
<PAGE>
Non-Performing Assets
The following table sets forth information with respect to the Bank's
non-performing assets at the dates indicated. No loans were recorded as
restructured loans within the meaning of SFAS No. 15 at the dates indicated.
<TABLE>
<CAPTION>
June 30, 1997 September 30, 1996
-------------- ------------------
(amounts in thousands)
<S> <C> <C>
Loans accounted for on a non-accrual basis:(1)
Real Estate:
Residential.................................. $ -- $ --
------------- -------------
Total................................. -- --
------------- -------------
Accruing loans which are contractually past due
90 days or more:
Real Estate:
Residential.................................... 305 567
Other ...................................... 85 58
Commercial..................................... -- --
Consumer......................................... 125 241
------------- -------------
Total................................. 515 866
============= =============
Total of non-accrual and 90 day past
due loans............................. $ 515 $ 866
============= =============
Percentage of net loans.............................. .64% 1.12%
============= =============
Other non-performing assets (2)...................... $ -- $ --
============= =============
</TABLE>
- --------------
(1) Non-accrual status denotes any loan past due 90 days and whose loan
balance, plus accrued interest exceeds 90% of the estimated loan
collateral value. Payments received on a non-accrual loan are either
applied to the outstanding principal balance or recorded as interest
income, or both, depending on assessment of the collectibility of the
loan.
(2) Other non-performing assets represent property acquired by the Bank
through foreclosure. This property is carried at the lower of its fair
market value or the principal balance of the related loan, whichever is
lower.
At June 30, 1997, the Bank did not have any loans in non-accrual status.
Accordingly, all income earned for the nine months ended June 30, 1997 on the
loans in the table above has been included in income.
At June 30, 1997, there were no loans identified by management, which were not
reflected in the preceding table, but as to which known information about
possible credit problems of borrowers caused management to have serious doubts
as to the ability of the borrowers to comply with present loan repayment terms.
11
<PAGE>
Financial Condition
The Company's consolidated assets decreased approximately $3,000 to $108.9
million at June 30, 1997. Investment securities increased $1.9 million, loans
increased $2.7 million, and cash, interest bearing deposits and certificates of
deposit decreased a total of $4.4 million.
The Company's investment portfolio increased approximately $1.9 million.
Securities classified as available-for-sale and recorded at market value per
SFAS No. 115 increased $817,000 due solely to the increase in market value of
such securities. Held-to-maturity securities increased $1.0 million due to the
purchase of FHLB and FNMA bonds, based on management's decision to seek higher
yields on funds available for investment.
Under SFAS No. 115, unrealized gains or losses on available-for-sale securities
are recorded net of deferred income tax as a separate component of stockholders'
equity. At June 30, 1997, the Company included net unrealized gains of
approximately $1,731,000 in stockholders' equity. At September 30, 1996, the
Company included net unrealized gains of approximately $1,192,000 in
stockholders' equity. Per SFAS No. 115, such gains or losses will not be
reflected as a charge or credit to earnings until the underlying gains or loss,
if any, is actually realized at the time of sale.
Loans receivable increased by $2.7 million, or 3.5% from $77.5 million at
September 30, 1996 to $80.2 million at June 30, 1997, as management continued
its efforts to meet the local demand in the Bank's market area.
Deposits increased approximately $1.5 million or 1.9% from $76.9 million at
September 30, 1996 to $78.4 million at June 30, 1997. This increase reflects the
Company's competitively priced product line within the local market area.
Stockholders' equity decreased by $888,000 to $29.3 million as of June 30, 1997.
The net decrease of $888,000 is due to a decrease of $2.0 million from the
purchase of Treasury Stock and the declaration of dividends totaling $667,000,
offset in part by net income of $1.1 million, an increase of $539,000 in net
unrealized appreciation on investments held-for-sale and an increase of $145,000
related to the release of ESOP shares from collateral during the nine months
ended June 30, 1997.
12
<PAGE>
The following summarizes the Bank's capital requirements and position at June
30, 1997 and September 30, 1996.
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
------------------------------- ------------------------------
(Dollars in Thousands)
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Tangible capital....................... $22,974 21.1% $21,754 20.2%
Tangible capital requirement........... 1,595 1.5% 1,618 1.5%
------- ----- ------- -----
Excess ........................ $21,379 19.6% $20,136 18.7%
======= ===== ======= =====
Core capital ........................ $22,974 21.1% $21,754 20.2%
Core capital requirement............... 3,190 3.0% 3,235 3.0%
------- ----- ------- -----
Excess ........................ $19,784 18.1% $18,519 17.2%
======= ===== ======= =====
Tangible capital ...................... $22,974 42.6% $21,754 40.2%
General valuation allowance............ 235 .4% 290 .5%
------- ----- ------- -----
Total capital (risk-based capital)..... $23,209 43.0% 22,044 40.7%
Risk-based capital requirement......... 4,316 8.0% 4,334 8.0%
------- ----- ------- -----
Excess ........................ $18,893 35.0% $17,710 32.7%
======= ===== ======= =====
</TABLE>
Liquidity
The liquidity of the Company depends primarily on the dividends paid to it as
the sole shareholder of the Bank. At June 30, 1997, the Bank could pay common
stock dividends of approximately $12.1 million.
The Bank's primary sources of funds are deposits and proceeds from principal and
interest payments of loans. Additional sources of liquidity are advances from
the FHLB of Cincinnati and other borrowings. At June 30, 1997, the Bank had no
outstanding borrowings. The Bank has utilized and may in the future, utilize
FHLB of Cincinnati borrowings during periods when management of the Bank
believes that such borrowings provide a lower cost source of funds than deposit
accounts and the Bank desires liquidity in order to help expand its lending
operations.
The Company's operating activities produced positive cash flows for the nine
month periods ended June 30, 1997 and 1996.
The Bank's most liquid assets are cash and cash-equivalents, which include
investments in highly liquid, short-term investments. At June 30, 1997 and 1996,
cash and cash equivalents totaled $13.1 million and $19.1 million, respectively.
At June 30, 1997, the Bank had $43.2 million in certificates of deposits due
within one year and $16.6 million due between one and three years. Management
believes, based on past experience, that the Bank will retain much of the
deposits or replace them with new deposits. At June 30, 1997, the Bank had $1.2
million in outstanding commitments to originate mortgages, excluding $966,000 in
approved but unused home
13
<PAGE>
equity lines of credit and $675,000 in approved but unused lines of credit and
letters of credit. The Bank intends to fund these commitments with short-term
investments and proceeds from loan repayments.
OTS regulations require that the Bank maintain specified levels of liquidity.
Liquidity is measured as a ratio of cash and certain investments to withdrawable
savings. The minimum level of liquidity required by regulation is presently
5.0%. During the first nine months of fiscal year 1997, the Bank satisfied all
regulatory liquidity requirements, and management believes that the liquidity
levels maintained are adequate to meet potential deposit outflows, loan demand,
and normal operations.
Impact of Inflation and Changing Prices
The consolidated financial statements and notes thereto presented herein have
been prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time and due to inflation. The impact of inflation is
reflected in the increased cost of the Company's operations. Unlike most
industrial companies, nearly all the assets and liabilities of the Company are
monetary in nature. As a result, interest rates have a greater impact on the
Company's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the price of goods and services.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Harrodsburg First Financial Bancorp, Inc.
Date: August 5, 1997 --------------------------------
Jack Hood, President
(Duly Authorized Officer)
Date: August 5, 1997 ----------------------------------
Teresa W. Noel, Treasurer
(Principal Financial and Accounting
Officer)
15
<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 None
(a) The following exhibits are filed herewith:
Exhibit 27.1 ....................Financial Data Schedule
Exhibit 27.2 ....................Financial Data Schedule
The above exhibit is filed as a correction to replace
the previously filed March 31, 1997 Financial Data
Schedule. The previous filed schedule contained quarter-
to-date income numbers. The corrected schedule contains
year-to-date income numbers.
There were no form 8-Ks filed during the quarter ended
June 30, 1997.
16
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<NAME> Harrodsburg First Financial Bancorp, Inc.
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