SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File Number 0-26560
HARDIN BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 43-1719104
- ---------------------------------------- ---------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization
2nd and Elm Street, Hardin, Missouri 64035
- ---------------------------------------- ---------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (660) 398-4312
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at September 30, 1998
--------------------------- ---------------------------------
Common stock, .01 par value 816,392
<PAGE>
HARDIN BANCORP, INC. AND SUBSIDIARIES
CONTENTS
PAGE
----
PART I
FINANCIAL INFORMATION
Item 1.
Unaudited Financial Statements
Consolidated Balance Sheets ............................................. 1
Consolidated Statements of Earnings ..................................... 2
Consolidated Statement of Stockholders' Equity .......................... 3
Consolidated Statements of Cash Flows ................................... 4-5
Notes to Consolidated Financial Statements .............................. 6
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................... 7-10
PART II
OTHER INFORMATION ......................................................... 11
Signatures ................................................................ 12
<PAGE>
Hardin Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
September 30, 1998 March 31, 1998
------------------ --------------
Assets
------
Cash ........................................ $ 885,390 $ 556,927
Interest bearing deposits ................... 9,661,405 3,224,874
Investment securities:
Held-to-maturity .......................... 0 10,000,000
Available-for-sale ........................ 32,768,917 22,656,010
Mortgage-backed securities:
Held-to-maturity .......................... 0 10,995,511
Available-for-sale ........................ 17,326,285 8,019,725
Loans receivable, net ....................... 67,277,905 61,273,984
Accrued interest receivable on:
Investment securities ..................... 319,647 359,601
Mortgage-backed securities ................ 120,441 133,459
Loans receivable .......................... 457,214 395,138
Premises and equipment ...................... 1,842,955 1,725,383
Stock in Federal Home Loan Bank (FHLB)
of Des Moines, at cost .................... 1,975,000 1,475,000
Prepaid expenses and other assets ........... 361,390 276,492
------------ ------------
Total assets ................................ $132,996,549 $121,092,104
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits .................................. $ 78,766,896 $ 76,884,462
Advances from borrowers for property
taxes and insurance ..................... 537,889 264,317
Advances from FHLB ........................ 39,000,000 29,500,000
Accrued interest payable .................. 61,796 56,149
Income taxes payable:
Current ................................. 165,097 323,520
Deferred ................................ 71,807 15,000
Accrued expenses and other liabilities .... 702,823 571,084
------------ ------------
Total liabilities ........................... 119,306,308 107,614,532
------------ ------------
Stockholders' equity:
Common stock, $.01 par value; 3,500,000
shares authorized, 1,058,000 shares
issued .................................. 10,580 10,580
Serial preferred stock, $.01 par value;
500,000 shares authorized, none issued
or outstanding .......................... 0 0
Additional paid in capital ................ 10,165,436 10,165,436
Retained earnings ......................... 7,690,346 7,482,320
Unrealized loss on available for sale
securities, net ......................... (1,600) (98,326)
Unearned employee stock ownership plan .... (518,280) (518,280)
Deferred recognition and retention plan ... (282,902) (327,011)
Treasury stock (241,608 and 234,440,
shares at cost, respectively) ........... (3,373,339) (3,237,147)
------------ ------------
Total stockholders' equity .................. 13,690,241 13,477,572
------------ ------------
Total liabilities and stockholders' equity .. $132,996,549 $121,092,104
============ ============
See accompanying notes to consolidated financial statements.
1
<PAGE>
Hardin Bancorp, Inc. and Subsidiaries
Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30 September 30
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable .................. $1,358,504 $1,175,879 $2,665,755 $2,327,986
Mortgage-backed securities ........ 263,860 285,801 547,337 599,186
Investment securities ............. 575,237 462,610 1,144,698 858,232
Other ............................. 93,168 118,478 157,824 211,995
---------- ---------- ---------- ----------
Total interest income ............... 2,290,769 2,042,768 4,515,614 3,997,399
---------- ---------- ---------- ----------
Interest expense:
Deposits .......................... 982,176 968,214 1,962,381 1,884,784
FHLB advances ..................... 546,847 318,369 1,004,901 610,320
---------- ---------- ---------- ----------
Total interest expense .............. 1,529,023 1,286,583 2,967,282 2,495,104
---------- ---------- ---------- ----------
Net interest income ................. 761,746 756,185 1,548,332 1,502,295
Provision for loan losses ........... 16,200 15,577 31,200 54,577
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses ................... 745,546 740,608 1,517,132 1,447,718
---------- ---------- ---------- ----------
Non-interest income:
Service charges ................... 90,556 29,757 167,659 54,389
Loan servicing fees ............... 8,071 8,184 16,050 16,337
Gain on sale of loans held for sale 0 13,958 14,998 16,442
Gain on sale of real estate owned . 0 0 0 4,105
Gain on sale of investments and
mortgage-backed securities ...... 118,444 5,391 131,046 49,822
Other ............................. 37,345 21,972 54,738 51,970
---------- ---------- ---------- ----------
Total non-interest income ........... 254,416 79,262 384,491 193,065
---------- ---------- ---------- ----------
Non-interest expense:
Compensation and benefits ......... 332,194 335,743 657,917 595,774
Occupancy and equipment ........... 61,544 32,529 118,780 62,176
Federal insurance premiums ........ 11,734 11,048 23,676 22,061
Data processing ................... 48,922 25,547 83,918 49,334
Real estate owned ................. 0 363 0 1,406
Other ............................. 164,271 133,082 347,804 262,546
---------- ---------- ---------- ----------
Total non-interest expense .......... 618,665 538,312 1,232,095 993,297
---------- ---------- ---------- ----------
Earnings before income taxes ........ 381,297 281,558 669,528 647,486
Income tax expense .................. 137,186 103,857 239,779 239,069
---------- ---------- ---------- ----------
Net earnings ........................ $ 244,111 $ 177,701 $ 429,749 $ 408,417
========== ========== ========== ==========
Net earnings per share:
Basic ............................. $ 0.32 $ 0.22 $ 0.56 $ 0.51
========== ========== ========== ==========
Diluted ........................... 0.31 0.22 0.54 0.50
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
Hardin Bancorp, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Six Months Ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Unearned
Unrealized Employee
Additional Gain or (loss) Stock Total
Common Paid-in Retained on Ownership Deferred Treasury Stockholders'
Stock Capital Earnings Securities, net Plan RRP Stock Equity
------ ---------- -------- --------------- --------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1998 .... $10,580 10,165,436 7,482,320 (98,326) (518,280) (327,011) (3,237,147) 13,477,572
Net earnings ................. 0 0 429,749 0 0 0 0 429,749
Change in net unrealized loss
on securities available
for sale, net of tax ....... 0 0 0 96,726 0 0 0 96,726
Repurchase of common stock ... 0 0 0 0 0 0 (136,192) (136,192)
Amortization of recognition
and retention plan ......... 0 0 0 0 0 44,109 0 44,109
Dividends declared ........... 0 0 (221,723) 0 0 0 0 (221,723)
------- ---------- --------- ------- -------- -------- ---------- ----------
Balance at September 30, 1998 $10,580 10,165,436 7,690,346 (1,600) (518,280) (282,902) (3,373,339) 13,690,241
======= ========== ========= ======= ======== ======== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Hardin Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Operating Activities:
Net Earnings .......................................... $ 429,749 $ 408,417
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Provision for losses on loans ..................... 31,200 54,577
Depreciation ...................................... 65,183 32,864
Premium accretion and amortization
of discounts and deferred loan fees, net ........ (182,644) 46,366
Net (gain)/loss on sale of loans and
investment and mortgage-backed securities ....... (146,044) (66,264)
Gain on real estate owned ......................... 0 (4,105)
Proceeds from sale of loans ....................... 590,680 0
Origination of loans held for sale ................ (1,896,140) 0
Amortization of deferred Recognition
and Retention Plan (RRP) ........................ 44,109 42,344
Changes in asset and liabilities:
Interest receivable ............................. (9,104) (11,628)
Other assets .................................... (84,898) (2,707)
Accrued interest payable ........................ 5,647 42,350
Accrued expense and other liabilities ........... 131,373 228,728
Income taxes payable ............................ (158,423) 63,405
------------ -----------
Net cash (used in) provided by operating activities ... (1,179,312) 834,347
------------ -----------
Investing Activities:
Net increase in loans receivable .................... (5,094,015) (2,930,008)
Purchase of loans receivable ........................ 0 (340,000)
Proceeds from sales of loans ........................ 371,770 0
Principal payments on mortgage-backed and
related securities:
Available-for-sale .............................. 1,324,085 449,793
Held-to-maturity ................................ 1,026,694 1,067,333
Purchase of mortgage-backed securities:
Available-for-sale .............................. 0 (7,819,121)
Proceeds from sales of mortgage-backed securities ... 0 4,895,433
Purchase of investment securities available-for-sale (16,117,348) (15,649,312)
Proceeds from maturities of investment securities:
Available-for-sale .............................. 8,000,000 9,148,589
Proceeds from sales of investment securities ........ 7,817,418 488,370
Purchase of stock in FHLB of Des Moines ............. (500,000) (375,000)
Purchase of real estate owned ....................... 0 (8,272)
Proceeds from sales of real estate owned ............ 0 107,515
Purchase of office properties and equipment ......... (182,755) (135,374)
------------ -----------
Net cash (used in) investing activities ............... $ (3,354,151) $(11,100,054)
------------ -----------
</TABLE>
4
<PAGE>
Hardin Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Financing Activities:
Net increase in savings deposits .................... 1,882,434 5,626,288
Proceeds from FHLB advances ......................... 15,000,000 17,500,000
Repayments of FHLB advances ......................... (5,500,000) (10,000,000)
Net increase in advances from borrowers for
taxes and insurance ............................... 273,572 221,527
Payment of dividends ................................ (221,357) (189,059)
Purchase of treasury stock .......................... (136,192) 0
------------ -----------
Net cash provided by financing activities ............. 11,298,457 13,158,756
------------ -----------
Increase in cash ...................................... 6,764,994 2,893,049
Cash at beginning of period ........................... 3,781,801 4,265,909
------------ -----------
Cash at end of period ................................. 10,546,795 7,158,958
------------ -----------
Supplemental disclosure of cash flow information:
Cash paid for:
Interest .......................................... $ 2,961,635 $2,452,754
Income taxes, net of refunds ...................... $ 398,202 $ 175,664
Non-cash investing and financing:
Dividends declared and payable ...................... $ 122,459 $ 103,123
Transfer of investment and mortgage-backed securities
from held-to-maturity to available-for-sale ....... $ 19,951,798 $ 0
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
HARDIN BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements of Hardin
Bancorp, Inc. and subsidiaries have been prepared in accordance with
instructions for Form 10-QSB. To the extent that information and footnotes
required by generally accepted accounting principles for complete financial
statements are contained in the audited financial statements included in
the Company's Annual Report for the year ended March 31, 1998, such
information and footnotes have not been duplicated herein. In the opinion
of management, all adjustments, consisting only of normal recurring
accruals, which are necessary for the fair presentation of the interim
financial statements have been included. The statement of earnings for the
six month period ended September 30, 1998 are not necessarily indicative of
the results which may be expected for the entire year. The March 31, 1998
consolidated balance sheet has been derived from the audited consolidated
financial statements as of that date.
(2) Earnings Per Share
Basic earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per share
includes the effect of potential dilutive common shares (stock options)
outstanding during the period. All 1997 per share data has been restated to
reflect the adoption of SFAS No. 128, "Earnings per Share".
The shares used in the calculation of basic and diluted earnings per share
are shown below:
<TABLE>
<CAPTION>
For the three months ended For the six months ended
September 30 September 30
-------------------------- ------------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic weighted average shares ........... 761,216 795,680 762,352 795,680
Common stock equivalents/stock options .. 30,716 27,629 34,134 22,687
------- ------- ------- -------
Diluted weighted average shares ......... 791,932 823,309 796,486 818,367
======= ======= ======= =======
</TABLE>
(3) Comprehensive Income
On April 1, 1998 the Company adopted SFAS No. 130, "Reporting Comprehensive
Income" which requires the reporting of comprehensive income and its
components. Comprehensive income is defined as the change in equity from
transactions and other events and circumstances from non-owner sources and
excludes investments by and distributions to owners. Comprehensive income
includes net income and other items of comprehensive income meeting the
above criteria. The Company's only component of other comprehensive income
is the unrealized holding gains and losses on available-for-sale
securities.
<TABLE>
<CAPTION>
For the three months ended For the six months ended
September 30 September 30
-------------------------- ------------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income .............................. $244,000 $178,000 $430,000 $408,000
Change in unrealized security loss, net . 64,000 44,000 97,000 66,000
-------- -------- -------- --------
Comprehensive income .................... $308,000 $222,000 $527,000 $474,000
======== ======== ======== ========
</TABLE>
6
<PAGE>
HARDIN BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
- -------
Hardin Bancorp, Inc. (the "Company") was incorporated under the laws of the
state of Delaware to become a savings bank holding company with Hardin Federal
Savings Bank (the "Bank") of Hardin, Missouri, as its subsidiary. The holding
company was incorporated at the direction of the Board of Directors of the Bank,
and on September 28, 1995, acquired all of the capital stock of the Bank upon
its conversion from mutual to stock form (the "conversion"). Prior to the
conversion, the holding company did not engage in any material operations.
Hardin Federal Savings Bank was originally founded in 1888 as a Missouri
chartered savings and loan association located in Hardin, Missouri. On March 21,
1995, the Bank's members voted to convert the Bank to a Federal mutual charter.
The Bank conducts its business through its main office in Hardin, Ray County,
and two full service branch offices located in Richmond, Ray County, and
Excelsior Springs, Clay County, Missouri. Deposits are insured by the Federal
Deposit Insurance Corporation (FDIC) to the maximum allowable.
The Bank is principally engaged in the business of attracting retail savings
deposits from the general public and investing those funds in first mortgage
loans on owner occupied, single-family residential loans, commercial real estate
loans, mortgage-backed securities, U.S. Government and agency securities, and
insured interest bearing deposits. The Bank also originates consumer loans for
the purchase of automobiles, home improvement, and home equity lines of credit.
The most significant outside factors influencing the operations of the Bank and
other financial institutions include general economic conditions, competition in
the local market place and the related monetary and fiscal policies of agencies
that regulate financial institutions. More specifically, the cost of funds
primarily consisting of insured deposits is influenced by interest rates on
competing investments and general market rates of interest, while lending
activities are influenced by the demand for real estate financing and other
types of loans, which in turn is affected by the interest rates at which such
loans may be offered and other factors affecting loan demand and funds
availability.
The deposits of the Bank are insured by the Savings Association Insurance Fund
(SAIF), which together with the Bank Insurance Fund (BIF), are the two insurance
funds administered by the FDIC.
FINANCIAL CONDITION
- -------------------
Consolidated assets of Hardin Bancorp, Inc. were $132,996,549 as of September
30, 1998, as compared to $121,092,104 on March 31, 1998, an increase of
$11,904,445. An increase in deposits of $1,882,434 and an increase in advances
from the Federal Home Loan Bank of Des Moines in the amount of $9,500,000
primarily funded the increase.
The 9.8% increase in total assets for the six months ended September 30, 1998 is
in accordance with the Company's growth objectives. The funds were used to
purchase investment securities, interest bearing deposits and to fund loan
growth.
Loans receivable, net, increased to $67,277,905 on September 30, 1998 from
$61,273,984 on March 31, 1998, an increase of $6,003,921. Mortgage-backed
securities decreased $1,688,951 to $17,326,285 on September 30, 1998, from
$19,015,236 on March 31, 1998. The decrease in mortgage-backed securities and
the increase in loans reflect the Bank's plan to increase the loan portfolio and
decrease mortgage-backed securities to improve the overall yield on interest
earning assets.
Cash, interest bearing deposits and investment securities increased $6,877,901
from $36,437,811 on March 31, 1998, to $43,315,712 on September 30, 1998. The
increase was primarily funded by an increase in savings deposits and FHLB
advances.
Deposits totaled $78,766,896 on September 30, 1998, an increase of $1,882,434
from $76,884,462 on March 31, 1998. The increase in deposits is primarily due to
a successful special certificate of deposit promotion and the Bank's high
performance checking account program.
7
<PAGE>
Stockholders' equity was $13,690,241 at September 30, 1998, compared to
$13,477,572 at March 31, 1998. The small change in stockholders' equity was the
result of net retained earnings, which was partially offset by a reduction in
deferred recognition and retirement plan, unrealized loss on available-for-sale
securities, net and the acquisition of 7,168 shares of treasury stock at an
aggregate purchase price of $136,192 or $19.00 per share.
RESULTS OF OPERATIONS
- ---------------------
Net earnings for the Company's quarter ended September 30, 1998 were $244,111
compared to $177,701 for the comparable quarter in 1997. The increase in
earnings was due to an increase in total non-interest income, primarily due to
increased service charges and gains on sales of investments and mortgage-backed
securities, which were partially offset by an increase in total non-interest
expense.
Basic earnings per share for the quarter ended September 30, 1998 were $0.32 per
share while diluted earnings per share were $0.31. Basic earnings per share were
calculated based on 761,216 average shares outstanding and diluted earnings per
share were calculated based on 791,732 average shares outstanding. Basic and
diluted earnings per share for the comparable quarter ended September 30, 1997
were $0.22. Basic earnings per share were calculated based on 795,680 average
shares outstanding and diluted earnings per share were calculated based on
823,309 average shares outstanding.
Net interest income after provision for loan losses for the quarter ended
September 30, 1998 was $745,546 compared to $740,608 for the quarter ended
September 30, 1997, an increase of $4,938. This increase was a result of
interest income increasing $248,001 from $2,042,768 in 1997 to $2,290,769 in
1998 while interest expense increased $242,440 from $1,286,583 in 1997 to
$1,529,023 in 1998. The increases in interest income and interest expense are
both due to increases in the average balance of interest-earning assets and
interest-bearing liabilities.
Non-interest income increased from $79,262 for the quarter ended September 30,
1997 to $254,816 for the quarter ended September 30, 1998. Service charge income
increased by $60,799 and gains realized on the sale of investments and
mortgage-backed securities increased by $113,053.
The Company's non-interest expense for the three months ended September 30, 1998
was $618,665 compared to $538,312 for the comparable quarter in 1997. The
increase was due to higher occupancy and equipment expense and data processing
expense related to the opening of the new branch office in Richmond. Other
non-interest expense increased from $133,082 for the quarter ended September 30,
1997 to $164,271 for the quarter ended September 30, 1998. The increase was
primarily due to marketing expenses related to the Bank's high performance
checking account program in an attempt to increase checking accounts.
Net earnings for the six months ended September 30, 1998, were $429,749 compared
to $408,417 for the six months ended September 30, 1997, an increase of $21,332.
The increase is related to net interest income after provision for loan losses,
an increase of non-interest income, partially offset by an increase in total
non-interest expense.
Net interest income after provision for loan losses for the six month period
ended September 30, 1998 was $1,517,132 compared to $1,447,718 for the six month
period ended September 30, 1997, an increase of $69,414. The increase was due to
an increase in interest earning assets.
Non-interest income for the six months ended September 30, 1998, was $384,491
compared to $193,065 for the six month period a year earlier, an increase of
$191,426. The increase was due to an increase in service charge income and gains
on the sale of investments and mortgage-backed securities.
The Company's non-interest expense for the six months ended September 30, 1998
was $1,232,095, compared to $993,297 for the six month period ended September
30, 1997, an increase of $238,798. The increase was due to an increase in
compensation and benefits, occupancy and equipment expense, data processing
expense and other non-interest expense primarily related to the opening of a new
branch office in Richmond, Missouri, on March 30, 1998, and marketing expenses
related to the Bank's high performance checking account program.
Income tax expense for the six months ended September 30, 1998, was $239,779
compared to $239,069 for the similar period in 1997. The increase was due to
slightly higher earnings before taxes in 1998.
8
<PAGE>
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses is based on the periodic analysis of the loan
portfolio by management. In establishing the provision, management considers
numerous factors including general economic conditions, loan portfolio
condition, prior loss experience, and independent analysis. The provision for
loan losses for the three months ended September 30, 1998, was $16,200 and for
the six months ended September 30, 1998, was $31,200. Based upon the analysis of
the addition to established allowances and the composition of the loan
portfolio, management concluded that the allowance is adequate. While current
economic conditions in the Bank's market are stable, future conditions will
dictate the level of future allowances for losses on loans.
NON-PERFORMING ASSETS
- ---------------------
On September 30, 1998, non-performing assets were $193,530 compared to $231,577
on March 31, 1998. On September 30, 1998, the Bank's allowance for loan losses
was $278,910, or 144% of non-performing assets compared to $247,710, or 107% on
March 31, 1998.
Loans are considered non-performing when the collection of principal and/or
interest is not probable, or in the event payments are more than 90 days
delinquent.
The allowance for loan losses was .41% of total loans as of September 30, 1998
compared to .40% at March 31, 1998.
CAPITAL RESOURCES
- -----------------
The Bank is subject to three capital to asset requirements in accordance with
Office of Thrift Supervision (OTS) regulations. The following table is a summary
of the Bank's regulatory capital requirements versus actual capital as of
September 30, 1998.
Actual Required Excess
Amount/Percent Amount/Percent Amount/Percent
-------------- -------------- --------------
(Dollars in Thousands)
Tangible Equity ............ $11,906/09.05% $2,631/2.00% $9,275/07.05%
Core Leverage Capital ...... $11,906/09.05% $5,262/4.00% $6,644/05.05%
Risk-based Capital ......... $12,185/25.20% $3,869/8.00% $8,316/17.20%
LIQUIDITY
- ---------
The Bank's principal sources of funds are deposits, principal and interest
payments on loans, deposits in other insured institutions, and investment
securities. While scheduled loan repayments and maturing investments are
relatively predictable, deposit flows and early loan payments are more
influenced by interest rates, general economic conditions and competition.
Additional sources of funds may be obtained from the Federal Home Loan Bank of
Des Moines by utilizing numerous available products to meet funding needs.
The Bank is required to maintain minimum levels of liquid assets as defined by
regulations. The required percentage is currently four percent of net
withdrawable savings deposits and borrowings payable on demand or in one year or
less. The Bank has maintained its liquidity ratio at levels exceeding the
minimum requirement. The eligible liquidity ratio at September 30, 1998 was
49.45%.
In light of the competition for deposits, the Bank may utilize the funding
sources of the Federal Home Loan Bank of Des Moines (FHLB) to meet loan demand
in accordance with the Bank's growth plans. The wholesale funding sources may
allow the Bank to obtain a lower cost of funding and create a more efficient
liability match to the respective assets being funded.
For purposes of the cash flows, all short-term investments with a maturity of
three months or less at the date of purchase are considered cash equivalents.
Cash and cash equivalents for the periods ended September 30, 1998 and 1997 were
$10,546,795 and $7,158,958, respectively. The increase was primarily due to an
increase from the sale of investment securities partially offset by a reduction
in deposit flows.
9
<PAGE>
Net cash provided by financing activities decreased from $13,158,756 for the six
months ended September 30, 1997 compared to $11,298,457 for the six months ended
September 30, 1998. The decrease was primarily due to a reduction in net
increase in savings deposits of $3.8 million, reduced proceeds from FHLB
advances in the amount of $1.5 million, offset by a $4.5 million reduction in
repayments of FHLB advances.
RECENT ACCOUNTING DEVELOPMENTS
- ------------------------------
The Financial Accounting Standards Board (FASB) issued SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities, in June 1998. SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. This statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999, however, in accordance
with the provision of the statement, the Company has chosen to apply the
provisions of the statement as of July 1, 1998. At the date of initial
application, the Company transferred all of its held-to-maturity securities to
the available-for-sale category. Accordingly, all unrealized holding gains or
losses at the date of transfer were recognized in a separate component of
stockholders' equity and other comprehensive income.
YEAR 2000 COMPLIANCE
- --------------------
The Company utilizes and is dependent upon data processing systems and software
to conduct its business. The data processing systems and software include those
developed and maintained by the Company's data processor and purchased software
which is run on in-house computer networks. In 1997 the Company initiated a
review and assessment of all hardware and software to confirm that it will
function properly in the year 2000.
The Company's data processor has announced the completion of all mainframe
application and personal computer based enhancements required for Year 2000
processing and for testing. The Company will verify the results of testing in
the quarter ending December 31, 1998. The Company has incurred costs of
approximately $7,000 for testing to date and anticipates only minimal additional
costs. The data processor will conduct terminal/network connectivity testing
with the Company in the first quarter of 1999. The Company has recently
purchased Year 2000 compliant personal computers for the teller system in the
current year at a cost of approximately $75,000. Additional costs of
approximately $7,000 are anticipated to complete the system. The equipment
replaced obsolete teller equipment. The Company estimates the total remaining
costs to ensure Year 2000 compliance to be approximately $10,000.
The Company has reviewed the commercial loan portfolio and does not believe
there is potential risk of repayment with any of the loans due to the failure of
the businesses. The Company's estimate of Year 2000 project costs and dates set
forth above by which certain phases of the project are expected to be completed
are based on management's best current estimate. Actual results could differ
from those estimated. The failure to correct material Year 2000 problems could
result in an interruption in, or failure of, certain normal business activities
or operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the uncertainty
inherent in the Year 2000 problem, the Company, at this time, is unable to
determine whether the consequences of Year 2000 failure will have a material
impact on the Company's results of operations, liquidity and financial
condition. The Company believes it will significantly reduce the possibility of
significant interruptions or failures with the completion of the Year 2000
project as scheduled.
Hardin Bancorp, Inc. continues to make progress toward Year 2000 compliancy and
has contingency plans, which include converting to another currently compliant
platform of the present data processor or operating on a manual basis, should
other third party vendors prove non-compliant.
10
<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
---------------------------------------------------
On July 23, 1998, the annual meeting of stockholders was held at
Hardin Federal Savings Bank, located at 200 North Spartan Drive,
Richmond, Missouri.
The meeting was conducted with a quorum present in person, or by
proxy. Matters, which were submitted to and approved by a majority of
stockholders, were as follows:
1. The election of three directors of the Company for three year
terms. David K. Hatfield received 726,572 votes for and 10,263
votes were withheld. William L. Homan received 727,222 votes for,
and 9,613 votes were withheld. W. Levan Thurman received 726,572
votes for, and 10,263 votes were withheld.
2. The ratification of the appointment of KPMG Peat Marwick LLP as
the auditors of the Company for the fiscal year ending March 31,
1999. Votes for KPMG Peat Marwick LLP were 712,066, votes against
were 4,569 and votes abstaining were 5,200.
Item 5. Other Information
-----------------
On September 17, 1998, the Company's Board of Directors authorized the
purchase of 81,639 shares of the Company's common stock to be acquired
over the next twelve months and notified the Office of Thrift
Supervision (OTS) in compliance with OTS regulations.
As of September 30, 1998, the Company held 241,608 shares of it common
stock as treasury stock at an aggregate purchase price of $3,373,339.
On September 17, 1998 the Board of Directors declared a $.15 per share
cash dividend to all stockholders of record on October 2, 1998,
payable on October 16, 1998.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits:
27 -- Financial Data Schedule
Reports on Form 8-K:
None.
11
<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.
HARDIN BANCORP, INC.
Registrant
Date: November 16, 1998 /s/ Robert W. King
----------------- -----------------------------------
Robert W. King, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: November 16, 1998 /s/ Karen K. Blankenship
----------------- -----------------------------------
Karen K. Blankenship, Senior Vice
President and Secretary (Principal
Accounting Officer)
12
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