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 December 31, 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 December 31, 1998
--------------------------- --------------------------------
Common stock, .01 par value 739,492
<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)
December 31, 1998 March 31, 1998
----------------- --------------
Assets
------
Cash ........................................ $ 954,714 $ 556,927
Interest bearing deposits ................... 4,408,887 3,224,874
Investment securities:
Held-to-maturity .......................... 0 10,000,000
Available-for-sale ........................ 36,463,072 22,656,010
Mortgage-backed securities:
Held-to-maturity .......................... 0 10,995,511
Available-for-sale ........................ 16,237,131 8,019,725
Loans receivable, net ....................... 67,055,955 61,273,984
Accrued interest receivable on:
Investment securities ..................... 230,601 359,601
Mortgage-backed securities ................ 111,094 133,459
Loans receivable .......................... 462,044 395,138
Premises and equipment ...................... 1,831,124 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 ........... 383,267 276,492
============ ============
Total assets ................................ $130,112,889 $121,092,104
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deposits .................................. $ 81,560,439 $ 76,884,462
Advances from borrowers for property
taxes and insurance ..................... 142,748 264,317
Advances from FHLB ........................ 35,000,000 29,500,000
Accrued interest payable .................. 66,100 56,149
Income taxes payable:
Current ................................. 262,982 323,520
Deferred ................................ (92,115) 15,000
Accrued expenses and other liabilities .... 765,744 571,084
------------ ------------
Total liabilities ........................... 117,705,898 107,614,532
------------ ------------
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 ......................... 7,980,161 7,482,320
Accumulated other comprehensive loss ...... (286,351) (98,326)
Unearned employee stock ownership plan .... (518,280) (518,280)
Deferred recognition and retention plan ... (260,554) (327,011)
Treasury stock (318,508 and 234,440,
shares at cost, respectively) ........... (4,684,001) (3,237,147)
------------ ------------
Total stockholders' equity .................. 12,406,991 13,477,572
============ ============
Total liabilities and stockholders' equity .. $130,112,889 $121,092,104
============ ============
See accompanying notes to unaudited consolidated financial statements.
1
<PAGE>
Hardin Bancorp, Inc. and Subsidiaries
Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31 December 31
---------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
Interest income:
<S> <C> <C> <C> <C>
Loans receivable .................. $1,360,212 $1,216,168 $4,025,967 $3,544,154
Mortgage-backed securities ........ 242,204 314,122 789,541 913,308
Investment securities ............. 465,084 453,297 1,609,782 1,311,529
Other ............................. 150,108 117,974 307,932 329,969
---------- ---------- ---------- ----------
Total interest income .................. 2,217,608 2,101,561 6,733,222 6,098,960
--------- --------- --------- ---------
Interest expense:
Deposits .......................... 980,127 981,643 2,942,508 2,866,427
FHLB advances ..................... 518,990 362,986 1,523,891 973,306
---------- ---------- ---------- ----------
Total interest expense ................. 1,499,117 1,344,629 4,466,399 3,839,733
--------- --------- --------- ---------
Net interest income .................... 718,491 756,932 2,266,823 2,259,227
Provision for loan losses .............. 18,800 24,094 50,000 78,671
------ ------ ------ ------
et interest income after provision
for loan losses ................... 699,691 732,838 2,216,823 2,180,556
------- ------- --------- ---------
Non-interest income:
Service charges ................... 129,933 39,190 297,592 93,579
Loan servicing fees ............... 5,571 9,718 21,621 26,055
Gain on sale of loans held for sale 75,063 23,877 90,061 40,319
Gain on sale of real estate owned . 0 1,553 0 5,658
Gain on sale of investments and
mortgage-backed securities .... 318,750 15,482 449,796 65,304
Other ............................. 42,488 36,949 97,226 88,919
---------- ---------- ---------- ----------
Total non-interest income .............. 571,805 126,769 956,296 319,834
------- ------- ------- -------
Non-interest expense:
Compensation and benefits ......... 349,178 253,285 1,007,095 829,459
Occupancy and equipment ........... 57,618 37,781 176,398 99,957
Federal insurance premiums ........ 11,507 11,747 35,183 33,808
Data processing ................... 40,298 27,304 124,216 76,638
Other ............................. 185,169 183,797 532,973 467,349
---------- ---------- ---------- ----------
Total non-interest expense ............. 643,770 513,914 1,875,865 1,507,211
------- ------- --------- ---------
Earnings before income taxes ........... 627,726 345,693 1,297,254 993,179
Income tax expense ..................... 227,884 126,267 467,663 365,336
---------- ---------- ---------- ----------
Net earnings ........................... $ 399,842 $ 219,426 $ 829,591 $ 627,843
========== ========== ========== ==========
Net earnings per share:
Basic ............................. $ 0.58 $ 0.29 $ 1.12 $ 0.80
========== ========== ========== ==========
Diluted ........................... 0.55 0.28 1.07 0.78
==== ==== ==== ====
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
Hardin Bancorp, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the Nine Months Ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Unrealized Unearned
Additional Gain or (loss) Employee Total
Common Paid-in Retained on Stock Deferred Treasury Shareholders'
Stock Capital Earnings Securities, net Ownership Plan RRP Stock Equity
----- ------- -------- --------------- -------------- -------- ----- ------
<S> <C> <C> <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
Comprehensive income:
Net earnings ............. 0 0 829,591 0 0 0 0 829,591
Change in net unrealized
loss on securities
available for sale, net of tax 0 0 0 (188,025) 0 0 0 (188,025)
------ ---------- ----------- -------- -------- ----------- ---------- -----------
Total comprehensive income 0 0 829,591 (188,025) 0 0 0 641,566
------ ---------- ----------- -------- -------- ----------- ---------- -----------
Purchase of 84,068 shares of
treasury stock ............... 0 0 0 0 0 0 (1,446,854) (1,446,854)
Amortization of recognition
and retention plan ........... 0 0 0 0 0 66,457 0 66,457
Dividends declared ............ 0 0 (331,750) 0 0 0 0 (331,750)
====== ========== =========== ======== ======== =========== ========== ===========
Balance at December 31, 1998 . 10,580 10,165,436 7,980,161 (286,351) (518,280) (260,554) (4,684,001) 12,406,991
====== ========== =========== ======== ======== =========== ========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
Hardin Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended December 31
(Unaudited)
1998 1997
------------ -----------
Operating Activities:
Net Earnings ................................... $ 829,591 627,843
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Provision for losses on loans .............. 50,000 78,671
Depreciation ............................... 97,819 49,358
Premium accretion and amortization
of discounts and deferred loan fees, net (171,741) 68,150
Net gain on sale of loans and investment
and mortgage-backed securities .......... (539,857) (105,623)
Gain on real estate owned .................. 0 (5,658)
Proceeds from sale of loans ................ 3,485,600 0
Origination of loans held for sale ......... (3,204,865) 0
Amortization of deferred Recognition
and Retention Plan (RRP) ................ 66,457 63,516
Changes in asset and liabilities:
Interest receivable .................. 84,459 (203,954)
Other assets ......................... (106,775) (7,125)
Accrued interest payable ............. 9,951 43,610
Accrued expense and other liabilities 206,726 198,272
Income taxes payable ................. (60,538) 123,983
------------ ------------
Net cash (used in) provided by
operating activities .......................... 746,827 931,043
------------ ------------
Investing Activities:
Net increase in loans receivable .............. (6,034,725) (4,400,198)
Purchase of loans receivable .................. 0 (1,072,050)
Principal payments on mortgage-backed &
related securities:
Available-for-sale ......................... 4,186,148 5,652,390
Held-to-maturity ........................... 1,026,694 1,629,717
Purchase of available-for-sale mortgage-
backed securities ............................ 0 (7,819,121)
Proceeds from sales of available-for-sale
mortgage-backed securities ................. 0 4,895,433
Purchase of available-for-sale
investment securities ....................... (32,244,489) (22,559,088)
Proceeds from maturities of available-for-sale
investment securities ....................... 8,000,000 12,650,000
Proceeds from sales of available for sale
investment securities ...................... 18,341,167 3,077,897
Purchase of stock in FHLB of Des Moines ....... (500,000) (375,000)
Proceeds from sales of real estate owned ...... 0 117,340
Purchase of office properties and equipment ... (203,560) (634,293)
------------ ------------
Net cash used in investing activities .......... (7,428,765) (8,836,973)
------------ ------------
4
<PAGE>
Hardin Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended December 31, 1998 and 1997
(Unaudited)
1998 1997
----------- -------------
Financing Activities:
Net increase in savings deposits ............. 4,675,977 6,441,352
Proceeds from FHLB advances .................. 18,000,000 20,500,000
Repayments of FHLB advances .................. (12,500,000) (15,000,000)
Net decrease in advances from borrowers for
taxes and insurance ....................... (121,569) (162,366)
Payment of dividends ......................... (343,816) (292,183)
Purchase of treasury stock ................... (1,446,854) (641,745)
----------- ------------
Net cash provided by financing activities ...... 8,263,738 10,845,058
----------- ------------
Increase in cash ............................... 1,581,800 2,939,128
Cash at beginning of period .................... 3,781,801 4,265,909
----------- ------------
Cash at end of period .......................... $ 5,363,601 7,205,037
=========== ============
Supplemental disclosure of cash flow
information: Cash paid for:
Interest .................................. $ 4,456,448 3,796,123
Income taxes, net of refunds .............. $ 528,201 241,353
Non-cash investing and financing:
Loans transferred to real estate owned ....... 0 8,272
Dividends declared and payable ............... $ 118,319 98,827
Transfer of investment and mortgage-backed
securities from held-to-maturity to
available-for-sale ......................... $ 19,951,798 0
See accompanying notes to unaudited 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
nine month period ended December 31, 1998 is 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.
The shares used in the calculation of basic and diluted earnings per share
are shown below:
For the three For the nine
months ended months ended
December 31 December 31
------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
Basic weighted average
shares ................... 691,546 765,591 738,664 781,389
Common stock equivalents/
stock options ............ 30,833 32,218 33,059 27,629
------- ------- ------- -------
Diluted weighted average
shares ................... 722,379 797,809 771,723 809,018
======= ======= ======= =======
(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.
For the three For the nine
months ended months ended
December 31 December 31
-------------------- ---------------------
1998 1997 1998 1997
---- ---- ---- ----
Unrealized holding gains
(losses) ............... (129,924) 89,814 154,655 243,941
Less: reclassification
adjustment for gains
included in net income . 318,750 15,482 449,796 65,304
-------- -------- -------- --------
Net unrealized gains
(losses) on securities . (448,674) 74,332 (295,141) 178,637
Income tax expense
(benefit) .............. (163,923) 27,503 (107,116) 65,676
-------- -------- -------- --------
Other comprehensive
income (loss) .......... (284,751) 46,829 (188,025) 112,961
======== ======== ======== ========
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 $130,112,889 as of December 31,
1998, as compared to $121,092,104 on March 31, 1998, an increase of $9,020,785.
An increase in deposits of $4,675,977 and an increase in advances from the
Federal Home Loan Bank of Des Moines in the amount of $5,500,000 primarily
funded the increase.
Loans receivable, net, increased to $67,055,955 on December 31, 1998 from
$61,273,984 on March 31, 1998, an increase of $5,781,971. Mortgage-backed
securities decreased $2,778,105 to $16,237,131 on December 31, 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 available for sale investment securities
increased $5,388,862 from $36,437,811 on March 31, 1998, to $41,826,673 on
December 31, 1998. The increase was primarily funded by an increase in savings
deposits and FHLB advances.
Deposits totaled $81,560,439 on December 31, 1998, an increase of $4,675,977
from $76,884,462 on March 31, 1998. The increase in deposits is primarily due to
an increase in checking and savings accounts.
Stockholders' equity was $12,406,991 on December 31, 1998, compared to
$13,477,572 on March 31, 1998. The change in stockholders' equity was the result
of net earnings, which was offset by a reduction in deferred recognition and
retention plan, an increase in unrealized loss on available-for-sale securities,
net and the acquisition of 84,068 shares of treasury stock at an aggregate
purchase price of $1,446,854 or $17.21 per share.
7
<PAGE>
RESULTS OF OPERATIONS
Net earnings for the Company's quarter ended December 31, 1998 were $399,842
compared to $219,426 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 an increase in gains on sales of investment
securities, mortgage-backed securities and loans. These increases were partially
offset by an increase in total non-interest expense.
Net interest income after provision for loan losses for the quarter ended
December 31, 1998 was $699,691 compared to $732,838 for the quarter ended
December 31, 1997, a decrease of $33,147. The decrease was a result of interest
income increasing $116,047 from $2,101,561 in 1997 to $2,217,608 in 1998, while
interest expense increased $154,488 from $1,344,629 in 1997 to $1,499,117 in
1998. The decrease in net interest income after provision for loan losses was a
result of a decrease in rates received on interest earning assets, while the
cost of interest bearing liabilities declined at a slower rate.
Non-interest income increased from $126,769 for the quarter ended December 31,
1997 to $571,805 for the quarter ended December 31, 1998. The increase was due
to an increase in fee income and an increase in gains on the sale of
investments, mortgage-backed securities and loans. Fee income increased as a
result of a significant increase in transaction accounts, and gains were
realized on the sale of a portion of the Bank's long term, fixed rate
investments and loans.
The Company's non-interest expense for the three months ended December 31, 1998
was $643,770 compared to $513,914 for the comparable quarter in 1997. The
increase was due to an increase in compensation and benefits, occupancy and
equipment expense and data processing expense related to the opening of the new
branch office in Richmond.
Income tax expense for three months ended December 31, 1998 was $227,884
compared to $126,267 for the similar period in 1997. The effective tax rates for
the three months ended December 31, 1998 was 36.3% compared to 36.5% for the
three months ended December 31, 1997.
Net earnings for the nine months ended December 31, 1998, were $829,591 compared
to $627,843 for the nine months ended December 31, 1997, an increase of
$201,748. The increase is primarily due to increases in non-interest income,
partially offset, by an increase in total non-interest expense.
Net interest income after provision for loan losses for the nine month period
ended December 31, 1998 was $2,216,823 compared to $2,180,556 for the nine month
period ended December 31, 1997, an increase of $36,267. The increase was due to
an increase in total interest earning assets, while the Bank's net interest
margin declined.
Non-interest income for the nine months ended December 31, 1998, was $956,296
compared to $319,834 for the nine month period a year earlier, an increase of
$636,462. The increase was due to an increase in service charges and an increase
in gains on the sale of investments, mortgage-backed securities and loans.
The Company's non-interest expense for the nine months ended December 31, 1998
was $1,875,865, compared to $1,507,211 for the nine months ended December 31,
1997, an increase of $368,654. 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, as well as marketing
expenses related to the Bank's high performance checking account program.
Income tax expense for the nine months ended December 31, 1998, was $467,663
compared to $365,336 for the similar period in 1997. The increase was due to an
increase in earnings before taxes in 1998. The effective tax rates for the nine
months ended December 31, 1998 was 36.1% compared to 36.8% for the nine months
ended December 31, 1997.
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 December 31, 1998, was $18,800 and for
the nine months ended December 31, 1998, was $50,000. 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.
8
<PAGE>
NON-PERFORMING ASSETS
On December 31, 1998, non-performing assets were $200,565 compared to $231,577
on March 31, 1998. On December 31, 1998, the Bank's allowance for loan losses
was $296,756, or 148% 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 .44% of total loans as of December 31, 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
December 31, 1998.
Actual Required Excess
Amount/Percent Amount/Percent Amount/Percent
-------------- -------------- --------------
(Dollars in Thousands)
Tangible Equity ......... $11,826/ 9.10% $2,602/2.00% $9,224/ 7.10%
Core Leverage Capital ... $11,826/ 9.10% $5,205/4.00% $6,621/ 5.10%
Risk-based Capital ...... $12,123/21.39% $4,422/8.00% $7,701/13.39%
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 December 31, 1998 was
49.66%.
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 December 31, 1998 and 1997 were
$5,363,601 and $7,205,037, respectively. The decrease was primarily due to a
decrease in the sale of investment securities.
Net cash provided by financing activities decreased from $10,845,058 for the
nine months ended December 31, 1997 compared to $8,263,738 for the nine months
ended December 31, 1998.
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, the
9
<PAGE>
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 is currently verifying the results of
testing. 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. 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 compliance 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.
FORWARD LOOKING STATEMENT
This Quarterly Report on Form 10-Q may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values and competition; changes in accounting principles, policies or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory and technological factors affecting the
Company's operations, pricing, products and services.
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
---------------------------------------------------
None.
Item 5. Other Information
-----------------
As of December 31, 1998, the Company held 318,508 shares of its common
stock as treasury stock at an aggregate purchase price of $4,684,001.
On December 17, 1998 the Board of Directors declared a $.16 per share
cash dividend to all stockholders of record on January 8, 1999,
payable on January 22, 1999.
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: February 16, 1999 /s/ Robert W. King
----------------- ------------------
Robert W. King, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: February 16, 1999 /s/ Karen K. Blankenship
----------------- ------------------------
Karen K. Blankenship, Senior Vice
President and Secretary (Principal
Accounting Officer)
12
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