UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-26560
HARDIN BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 43-1719104
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2nd and Elm Streets, Hardin, Missouri 64035
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (660) 398-4312
----------------------
Securities Registered Pursuant to Section 12(b) of the Act:
None
----
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of class)
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
requirements for the past 90 days. YES X . NO ___.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
[X]
The registrant's revenues for the fiscal year ended March 31, 2000 were
$8.8 million.
The aggregate market value of the voting stock held by non-affiliates
of the registrant, computed by reference to the closing bid price of such stock
on the Nasdaq Small Cap Market as of March 31, 2000, was $10.1 million. (The
exclusion from such amount of the market value of the shares owned by any person
shall not be deemed an admission by the registrant that such person is an
affiliate of the registrant.)
As of March 31, 2000, there were 1,058,000 shares issued and 731,453
shares outstanding of the registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Parts II and III of Form 10-KSB - Portions of the Annual Report to
Stockholders for the fiscal year ended March 31, 2000.
Part III of Form 10-KSB - Portions of the Proxy Statement for 2000
Annual Meeting of Stockholders.
<PAGE>
PART I
Item 1. Description of Business
General
Hardin Bancorp, Inc. ("Hardin Bancorp" and with its subsidiaries, the
"Company") was formed in June 1995 at the direction of Hardin Federal Savings
Bank ("Hardin Federal" or the "Bank") for the purpose of owning all of the
outstanding stock of the Bank issued upon the conversion of the Bank from the
mutual to stock form (the "Conversion"). On September 28, 1995, Hardin Bancorp
acquired all of the shares of the Bank in connection with the completion of the
Conversion. All references to the Company, unless otherwise indicated, at or
before September 28, 1995 refer to the Bank and its subsidiary on a consolidated
basis. The Company's common stock is quoted on the Nasdaq Small Cap Market under
the symbol "HFSA."
Hardin Federal is a federally chartered stock savings bank
headquartered in Hardin, Missouri. Hardin Federal was originally chartered under
the laws of the State of Missouri in 1914, converted to a federally chartered
mutual savings bank in March 1995 and consummated its conversion to a stock
savings bank on September 28, 1995. Its deposits are insured up to the maximum
allowable amount by the Savings Association Insurance Fund ("SAIF") of the
Federal Deposit Insurance Corporation (the "FDIC"). Through its main office and
two branch offices, Hardin Federal serves communities located in Ray and Clay
Counties, and in surrounding counties, in the State of Missouri. At March 31,
2000, the Company had total assets of $138.5 million, deposits of $86.6 million
and total equity of $12.4 million.
Hardin Federal has been, and intends to continue to be, a
community-oriented financial institution offering selected financial services to
meet the needs of the communities it serves. The Bank attracts deposits from the
general public and historically has used such deposits, together with other
funds, primarily to originate one- to four-family residential mortgage loans.
The Bank also originates consumer loans, and, to a lesser extent, construction
and land loans and commercial real estate loans. See "- Lending Activities." The
Bank also invests in mortgage-backed securities, which are insured or guaranteed
by federal agencies, and other investment securities. See "--Investment
Activities."
The executive office of the Bank is located at 201 Northeast Elm
Street, Hardin, Missouri 64035. Its telephone number at that address is (660)
398-4312.
Market Area
Hardin Federal serves primarily Ray and Clay Counties, Missouri. The
Bank currently has three offices. Its main office and Richmond branch are
located in Ray County, Missouri and its Excelsior Springs branch is located in
Clay County, Missouri. On March 31, 1998, the Bank opened its new branch office
in Richmond, Missouri and vacated its old branch office. See "Item 2.
Description of Property."
Ray and Clay Counties, Missouri are located approximately 40 miles east
of Kansas City, Missouri. Ray County, Missouri has a population of approximately
22,000 and Clay County, Missouri has a population of approximately 153,000. The
major employers in the Bank's primary market area are engaged in agricultural,
light industry, medical services and education, and include Ford Motor Co.,
Orbseal, Inc.,
2
<PAGE>
American Italian Pasta Co., Ray County Memorial Hospital, Excelsior Springs
Community Hospital, the Richmond RXVI Public Schools, Lawson RXIV Public Schools
and Excelsior Springs Public Schools.
Lending Activities
General. The Bank's loan portfolio consists primarily of conventional,
first mortgage loans secured by one- to four-family residences and, to a lesser
extent, consumer, construction, commercial business and land acquisition loans.
At March 31, 2000, the Bank's gross loans and mortgage-backed securities
outstanding totalled $93.0 of which $60.7 million or 65.3% were one- to
four-family residential mortgage loans. Of the one- to four-family mortgage
loans outstanding at that date, 45.0% were fixed-rate loans, and 20.3% were
adjustable-rate loans. At that same date, consumer loans totalled $10.2 million
or 11.0% of the Bank's total loan portfolio, construction loans totalled $3.2
million or 3.5% of the Bank's total loan and mortgage-backed securities
portfolio, commercial real estate loans totalled $3.0 million or 3.2% of the
Bank's total loan and mortgage-backed securities portfolio and land acquisition
loans totalled $3.3 million or 3.6% of the Bank's total loan and mortgage-backed
securities portfolio.
The Bank also invests in mortgage-backed securities. At March 31, 2000,
mortgage-backed securities totalled $11.8 million. See "--Investment
Activities."
The Bank's loans-to-one borrower limit is generally limited to the
greater of 15% of unimpaired capital and surplus or $500,000. See "Regulation -
Federal Regulation of Savings Associations." At March 31, 2000, the maximum
amount which the Bank could have lent under this limit to any one borrower and
the borrower's related entities was approximately $1.8 million. At March 31,
2000, the Bank had no loans or groups of loans to related borrowers with
outstanding balances in excess of this amount. The Bank's largest lending
relationship in loans to one borrower at March 31, 2000 was $1.1 million secured
by a loan to develop raw land into residential lots located in Clay County,
Missouri. At March 31, 2000, these loans were performing in accordance with
their terms.
3
<PAGE>
Loan Portfolio Composition. The following information sets forth the
composition of the Bank's loan portfolio (including mortgage-backed securities)
in dollar amounts and in percentages (before deductions for loans in process,
deferred fees and discounts and allowances for losses) at the dates indicated.
<TABLE>
<CAPTION>
At March 31,
--------------------------------------------------------------------------
2000 1999 1998
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
------- --------- ---------- --------- ------ -------
(Dollars in Thousands)
Real Estate Loans:
-----------------
<S> <C> <C> <C> <C> <C> <C>
One- to four-family.......................... $ 60,675 65.26% $ 54,122 64.04% $ 50,646 60.65%
Land......................................... 3,304 3.55 3,048 3.61 810 .98
Commercial................................... 2,986 3.21 3,031 3.59 2,356 2.82
Construction................................. 3,214 3.46 2,380 2.81 3,967 4.75
--------- ------- --------- ------- --------- ------
Total real estate loans................... 70,179 75.48 62,581 74.05 57,779 69.20
--------- ------- --------- ------- --------- ------
Consumer Loans:
--------------
Consumer Loans:
Secured by deposits......................... 829 0.89 976 1.15 635 .76
Automobile.................................. 2,548 2.74 2,008 2.38 1,631 1.95
Home equity................................. 5,337 5.74 4,338 5.13 3,193 3.82
Home improvement............................ 316 0.34 303 0.36 521 .62
Other consumer loans........................ 1,161 1.25 945 1.12 725 .88
--------- ------- --------- ------- --------- ------
Total consumer loans...................... 10,191 10.96 8,570 10.14 6,705 8.03
--------- ------- --------- ------- --------- ------
Commercial business loans.................... 796 0.86 781 0.92 -- --
--------- ------- --------- ------- --------- ------
Total loans receivable...................... 81,166 87.30 71,932 85.11 64,484 77.23
--------- ------- --------- ------- --------- ------
Mortgage-Backed Securities:
--------------------------
GNMA......................................... 2,053 2.21 1,118 1.32 4,446 5.32
FHLMC........................................ 4,068 4.38 4,158 4.92 5,425 6.50
FNMA......................................... 5,685 6.11 7,308 8.65 9,144 10.95
--------- ------- --------- ------- --------- ------
Total mortgage-backed securities.......... 11,806 12.70 12,584 14.89 19,015 22.77
--------- ------- --------- ------- --------- ------
Total loan and mortgage-backed
securities portfolio.................... 92,972 100.00% 84,516 100.00% 83,499 100.00%
======= ====== ======
Less:
----
Loans in process............................... (2,910) (2,195) (3,022)
Deferred fees and discounts.................... 107 79 60
Allowance for loan losses...................... (304) (311) (248)
--------- --------- ---------
Total loan and mortgage-backed
securities portfolio, net............... $ 89,865 $ 82,089 $ 80,289
========= ========= =========
</TABLE>
4
<PAGE>
The following table shows the composition of the Bank's loan and
mortgage-backed securities portfolio by fixed- and adjustable-rate at the dates
indicated.
<TABLE>
<CAPTION>
At March 31,
--------------------------------------------------------------------------
2000 1999 1998
---------------------- ---------------------- ----------------------
Amount Percent Amount Percent Amount Percent
--------- ---------- --------- ---------- --------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed-Rate Loans:
----------------
Real estate:
One- to four-family....................... $ 41,810 44.97% $ 36,589 43.29% $ 30,623 36.67%
Land...................................... 538 0.58 512 0.61 426 .51
Commercial................................ 567 0.61 624 0.74 529 .64
Construction.............................. 2,870 3.08 1,711 2.02 3,298 3.95
------- --------- ------- --------- ------
Total real estate loans.................. 45,785 49.24 39,436 46.66 34,876 41.77
Consumer.................................... 6,340 6.82 5,829 6.90 5,062 6.06
Commercial business......................... 18 0.02 -- -- -- --
Mortgage-backed securities.................. -- -- -- -- -- --
--------- ------- --------- ------- --------- ------
Total fixed-rate......................... 52,143 56.08 45,265 53.56 39,938 47.83
--------- ------- --------- ------- --------- ------
Adjustable-Rate Loans:
---------------------
Real estate:
One- to four-family....................... 18,865 20.29 17,533 20.75 20,023 23.98
Land...................................... 2,766 2.98 2,536 3.00 384 .46
Commercial................................ 2,419 2.60 2,407 2.85 1,827 2.19
Construction.............................. 344 0.37 669 0.79 669 .80
--------- ------- --------- ------- --------- ------
Total real estate loans.................. 24,394 26.24 23,145 27.39 22,903 27.43
Consumer.................................... 3,851 4.14 2,741 3.24 1,643 1.97
Commercial business......................... 778 0.84 781 0.92 -- --
Mortgage-backed securities.................. 11,806 12.70 12,584 14.89 19,015 22.77
--------- ------- --------- ------- --------- ------
Total adjustable rate.................... 40,829 43.92 39,251 46.44 43,561 52.17
--------- ------- --------- ------- --------- ------
Total loan and mortgage-backed
securities portfolio.................... 92,972 100.00% 84,516 100.00% 83,499 100.00%
========= ====== ======
Less:
----
Loans in process.......................... (2,910) (2,195) (3,022)
Deferred loan fees and discounts.......... 107 79 60
Allowance for loan losses................. (304) (311) (248)
--------- --------- ----------
Total loans and mortgage-backed
securities portfolio, net............... $ 89,865 $ 82,089 $ 80,289
========= ========= =========
</TABLE>
5
<PAGE>
The following schedule illustrates the contractual maturity and
weighted average rates of the Bank's loan portfolio at March 31, 2000. Mortgages
which have adjustable or renegotiable interest rates are shown as maturing in
the period during which the contract is due. The schedule does not reflect the
effects of scheduled payments, possible prepayments or enforcement of
due-on-sale clauses.
<TABLE>
<CAPTION>
One-to Four-Family Construction Commercial Real EstateLand Consumer
-------------------- -------------------- -------------------------------- ------------
Due During Weighted Weighted Weighted Weighted Weighted
Year Ending Average Average Average Average Average
March 31, Amount Rate Amount Rate Amount Rate Amount Rate Amount Rate
------------ --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2001(1)............. $ 353 7.92% $ 1,594 8.64% $ 475 9.63% $ 40 9.00% $ 1,896 8.47%
2002................ 852 8.37 -- -- 7 9.00 1,800 9.69 544 10.11
2003................ 200 8.39 -- -- -- -- -- -- 886 9.82
2004 and 2005....... 489 8.48 -- -- 16 9.50 87 8.55 1,802 9.40
2006 to 2010........ 5,551 7.82 -- -- 530 8.64 187 8.41 1,082 9.65
2011 to 2025........ 31,134 7.79 396 8.16 1,893 8.62 992 8.95 3,981 9.97
2026 and following.. 22,096 7.97 1,224 8.57 65 7.50 198 8.29 -- --
-------- -------- --------- --------- ---------
.................... $ 60,675 $ 3,214 $ 2,986 $ 3,304 $ 10,191
======== ======== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Commercial Business Total
-------------------- ------------------------
Due During Weighted Weighted
Year Ending Average Average
March 31, Amount Rate Amount Rate
------------ --------- --------- --------- ------------
<S> <C> <C> <C> <C>
2001(1)............. $ 475 9.57% $ 4,833 8.71%
2002................ -- -- 3,203 9.41
2003................ 21 10.36 1,107 9.57
2004 and 2005....... -- -- 2,394 9.18
2006 to 2010........ 300 8.75 7,650 8.19
2011 to 2025........ -- -- 38,396 8.09
2026 and following.. -- -- 23,583 8.01
--------- --------
.................... $ 796 $ 81,166
========= ========
</TABLE>
-----------------------
(1)The total amount of loans due after March 31, 2001 which have
predetermined interest rates is $48.8 million while the total amount of loans
due after such date which have floating or adjustable interest rates is $27.8
million.
6
<PAGE>
All of the Bank's lending is subject to its written underwriting
standards and loan origination procedures. Decisions on loan applications are
made on the basis of detailed applications and property valuations, if
applicable. Properties securing real estate loans made by Hardin Federal are
generally appraised by Board-approved independent appraisers. All appraisals are
subsequently reviewed by the Bank's Loan Committee, as applicable. In the loan
approval process, Hardin Federal assesses the borrower's ability to repay the
loan, the adequacy of the proposed security, the employment stability of the
borrower and the credit-worthiness of the borrower.
The Bank requires evidence of marketable title and lien position or
appropriate title insurance on all loans secured by real property. The Bank also
requires fire and extended coverage casualty insurance in amounts at least equal
to the lesser of the principal amount of the loan or the value of improvements
on the property, depending on the type of loan. As required by federal
regulations, the Bank also requires flood insurance to protect the property
securing its interest if such property is located in a designated flood area.
Management reserves the right to change the amount or type of lending
in which it engages to adjust to market or other factors.
One- to Four-Family Residential Mortgage Lending. Residential loan
originations are generated by the Bank's marketing efforts, its present
customers, walk-in customers and referrals from real estate brokers. The Bank
has focused its lending efforts primarily on the origination of loans secured by
first mortgages on owner-occupied, single-family residences in its market area.
At March 31, 2000, the Bank's one- to four-family residential mortgage loans
totalled $60.7 million, or 65.3%, of the Bank's gross loan and mortgage-backed
securities portfolio. The Bank experienced significant growth in its one- to
four-family residential mortgage loan portfolio during the year ended March 31,
2000 as a result of increased demand for such loans within the Bank's market
area and increased purchases by the Bank of such loans. It is the Bank's policy
to purchase only those loans which meet its own underwriting criteria.
The Bank currently offers fixed-rate and adjustable-rate mortgage
loans. For the year ended March 31, 2000, the Bank originated $11.4 million
fixed-rate one- to four-family loans, which constituted 70.5% of total one- to
four-family loans originated and $4.8 million of adjustable-rate one- to
four-family loans or 29.5% of total one- to four-family loans originated.
Substantially all of the Bank's one- to four- family residential mortgage
originations are secured by properties located in its market area.
The Bank offers adjustable-rate mortgage loans at rates and on terms
determined in accordance with market and competitive factors. The Bank currently
originates adjustable-rate mortgage loans with a term of up to 30 years. The
Bank currently offers one-year and three-year adjustable-rate mortgage loans
(where the terms are fixed for the first one-year and three-years, respectively,
and thereafter adjust every one or three years) with a stated interest rate
margin over the one and three year U.S. Treasury Index adjusted to a constant
maturity. Increases or decreases in the interest rate of the Bank's
adjustable-rate loans are generally limited to 2.0% at any adjustment date and
6.0% over the life of the loan. As a consequence of using caps, the interest
rates on these loans may not be as rate sensitive as is the Bank's cost of
funds. Currently, all adjustable-rate mortgage loans originated provide for a
minimum interest rate. The Bank qualifies borrowers for adjustable-rate loans
based on a current interest rate plus the first adjustment. As a result, the
risk of default on these loans may increase as interest rates increase. See
"--Asset Quality--Non-Performing Assets." At March 31, 2000, the total balance
of one-to four-family adjustable-rate loans was $18.9 million or 20.3% of the
Bank's gross loan and mortgage-backed securities portfolio. See "--Originations,
Purchases and Sales of Loans."
7
<PAGE>
Adjustable-rate loans decrease the risk associated with changes in
interest rates but involve other risks, primarily because as interest rates
rise, the payment by the borrowers may rise to the extent permitted by the terms
of the loan, thereby increasing the potential for default. Also, adjustable-rate
loans have features which restrict changes in interest rates on a short-term
basis and over the life of the loan. At the same time, the market value of the
underlying property may be adversely affected by higher interest rates.
The Bank also offers fixed-rate mortgage loans with maturities of up to
30 years. At March 31, 2000, the total balance of one- to four-family fixed-rate
loans was $41.8 million or 45.0% of the Bank's gross loan and mortgage-backed
securities portfolio. See "--Originations, Purchases and Sales of Loans."
Hardin Federal will lend up to 95% of the lesser of the sales price or
appraised value of the security property on owner occupied one- to four-family
loans, provided that private mortgage insurance is obtained in an amount
sufficient to reduce the Bank's exposure to not more than 80% of the appraised
value or sales price, as applicable. Residential loans do not include prepayment
penalties, are non-assumable (other than government-insured or guaranteed
loans), and do not produce negative amortization. Real estate loans originated
by the Bank customarily contain a "due on sale" clause allowing the Bank to
declare the unpaid principal balance due and payable upon the sale of the
security property.
The loans currently originated by the Bank are underwritten and
documented pursuant to the guidelines of the FHLMC. Under current policy, the
Bank originates these loans for its portfolio. See "--Originations, Purchases
and Sales of Loans and Mortgage-Backed Securities."
Consumer Lending. Hardin Federal offers a variety of consumer loans,
including home equity lines of credit, automobile, home improvement, and loans
secured by deposits. The Bank currently originates substantially all of its
consumer loans in its primary market area generally to its existing customers.
At March 31, 2000, the Bank's consumer loan portfolio totalled $10.2 million, or
11.0% of its gross loan and mortgage-backed securities portfolio.
Hardin Federal originates home equity and home improvement loans. Home
equity and home improvement loans secured by second mortgages, together with
loans secured by all prior liens, are generally limited to 80% or less of the
appraised value. If the Bank originates loans with greater than an 80% loan-to-
value ratio, it requires the borrower to obtain private mortgage insurance in an
amount equal to 100% of the loan-to-value ratio. Generally, such loans have a
maximum term of up to 10 years. As of March 31, 2000, home equity and home
improvement loans amounted to $5.3 million and $316,000, respectively, which
represented 5.7% and .3%, respectively, of the Bank's gross loan and
mortgage-backed securities portfolio.
The Bank also recently began originating equity lines of credit. These
loans are generally limited to 89% or less of the appraised value of the
property securing the loan. These loans are all adjustable-rate loans and have
maximum terms of up to 15 years.
Another component of the Bank's consumer loan portfolio consists of
automobile loans. The Bank originates automobile loans on a direct basis, where
the Bank extends credit directly to the borrower. These loans generally have
terms that do not exceed five years and carry a fixed-rate of interest.
Generally, loans on new vehicles are made in amounts up to 90% of dealer cost
and loans on used vehicles are made in amounts up to its published value, less
certain adjustments. At March 31, 2000, the Bank's automobile loans totalled
$2.5 million or 2.7% of the Bank's gross loan and mortgage-backed securities
portfolio.
8
<PAGE>
Consumer loan terms vary according to the type and value of collateral,
length of contract and creditworthiness of the borrower. The underwriting
standards employed by the Bank for consumer loans include an application, a
determination of the applicant's payment history on other debts and an
assessment of ability to meet existing obligations and payments on the proposed
loan. Although creditworthiness of the applicant is a primary consideration, the
underwriting process also includes a comparison of the value of the security, if
any, in relation to the proposed loan amount.
Consumer loans may entail greater credit risk than do residential
mortgage loans, particularly in the case of consumer loans which are unsecured
or are secured by rapidly depreciable assets, such as automobiles. Further, any
repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding loan balance as a result of the greater
likelihood of damage, loss or depreciation. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans. At March 31, 2000, $18,000 of the Bank's consumer loans were
non-performing. See "-- Non-Performing Assets and Classified Assets." There can
be no assurances, however, that delinquencies will not occur in the future.
Construction Lending. At March 31, 2000, the Bank had $3.2 million of
construction loans. Hardin Federal offers loans to both builders and individuals
for the construction of one- to four-family residences. Currently, such loans
are offered with fixed- or adjustable-rates of interest. At March 31, 2000, the
Bank had $2.9 million and $344,000 of fixed-rate and adjustable-rate
construction loans, respectively, which represented 3.1% and .4%, respectively,
of the Bank's gross loan and mortgage-backed securities portfolio. From time to
time the Bank may purchase construction loans, but no such purchases were made
during fiscal 2000. The Bank will purchase only those construction loans which
are underwritten under guidelines which are as stringent as those employed by
the Bank when it originates a construction loan. Following the construction
period, these loans may become permanent loans, with terms for up to 30 years.
Construction lending is generally considered to involve a higher level
of credit risk than one- to four- family residential lending since the risk of
loss on construction loans is dependent largely upon the accuracy of the initial
estimate of the individual property's value upon completion of the project and
the estimated cost (including interest) of the project. If the cost estimate
proves to be inaccurate, the Bank may be required to advance funds beyond the
amount originally committed to permit completion of the project.
Commercial Real Estate Lending. The Bank also originates commercial
real estate loans. At March 31, 2000 approximately $3.0 million, or 3.2% of the
Bank's gross loan and mortgage-backed securities portfolio, was comprised of
commercial real estate loans of which none was non-performing at that date. The
largest commercial real estate loan is a real estate development loan secured by
property in Clay County, Missouri.
In underwriting these loans, the Bank currently analyzes the financial
condition of the borrower, the borrower's credit history, and the reliability
and predictability of the cash flow generated by the property securing the loan.
The Bank generally requires personal guaranties of the borrowers. Appraisals on
properties securing commercial real estate loans originated by the Bank are to
the extent required by federal regulations performed by independent appraisers.
9
<PAGE>
Commercial real estate loans generally present a higher level of risk
than loans secured by one- to four-family residences. This greater risk is due
to several factors, including the concentration of principal in a limited number
of loans and borrowers, the effect of general economic conditions on income
producing properties and the increased difficulty of evaluating and monitoring
these types of loans. Furthermore, the repayment of loans secured by commercial
real estate is typically dependent upon the successful operation of the related
real estate project. If the cash flow from the project is reduced (for example,
if leases are not obtained or renewed, or a bankruptcy court modifies a lease
term, or a major tenant is unable to fulfill its lease obligations), the
borrower's ability to repay the loan may be impaired.
Commercial Business Loans
At March 31, 2000, the Bank had a total of $796,000 outstanding in
commercial business loans, and an additional commitment to fund a $240,000 line
of credit. At March 31, 2000, the largest outstanding commercial business loan
was a $340,000 loan to a farm implement dealership in Ray County, Missouri that
was secured by machinery, equipment and accounts receivable. The Bank had a
total of eight commercial loans at March 31, 2000.
Commercial business loans are underwritten by analyzing the financial
condition of the borrower, the borrower's credit history, the reliability and
predictability of the business operations and the security for the loan.
Commercial loans and credit lines are continually monitored in an attempt to
detect any adverse conditions at the earliest possible stages to limit the
Bank's exposure to potential losses.
Commercial business lending represents a relatively new lending arena
for the Bank. In the near term, management intends to limit both the size and
number of commercial loans.
Commercial business lending generally involves greater risk than
residential mortgage lending and involves risks that are different from those
associated with residential, commercial and multi-family real estate lending.
Real estate lending is generally considered to be collateral based lending with
loan amounts based on predetermined loan to collateral values and liquidation of
the underlying real estate collateral is viewed as primary source of repayment
in the event of borrower default. Although commercial business loans may be
collateralized by equipment or other business assets, the liquidation of
collateral in the event of borrower default is often not a sufficient source of
repayment. Accordingly, the repayment of a commercial business loan depends
primarily on the creditworthiness of the borrower, while liquidation of
collateral is a secondary and often insufficient source of repayment.
Originations, Purchases and Sales of Loans
Loan originations are developed from continuing business with
depositors and borrowers, soliciting realtors, builders, walk-in customers and
third-party sources.
While the Bank originates both adjustable-rate and fixed-rate loans,
its ability to originate loans to a certain extent is dependent upon the
relative customer demand for loans in its market, which is affected by the
interest rate environment, among other factors. For the year ended March 31,
2000, the Bank originated $21.1 million in fixed-rate loans and $9.2 million in
adjustable rate loans.
The Bank from time-to-time sells fixed rate loan originations as part
of its asset/liabilities management policies. The Bank generally followed a
policy of selling its fixed-rate loan originations during
10
<PAGE>
fiscal 1994. In early fiscal 1995, the Bank changed its policy to retain
fixed-rate loan originations in its portfolio. The Bank's Board of Directors has
adopted an informal policy which is subject to change from time-to-time, of
retaining fixed-rate loans in order to increase the overall level of fixed-rate
loans in its portfolio up to 60% of total loans receivable. At March 31, 2000,
fixed-rate loans comprised 56.1% of gross loan and mortgage-backed securities
portfolio. Reflecting these policies, during the fiscal years ended March 31,
2000, 1999 and 1998, the Bank sold $675,000, $3.5 million, and $3.7 million,
respectively, of one- to four-family fixed-rate real estate loans.
During fiscal year 2000, the Bank purchased $423,000 of real estate
loans originated by other lenders all of which were secured by properties
located in Missouri. At March 31, 2000, none of these loans were included in the
Bank's non-performing assets. See "--Non-Performing Assets and Classified
Assets." As part of the Bank's effort to increase the size of its loan
portfolio, management anticipates that loan purchases may increase in the
future. It is presently anticipated that such purchases would consist primarily
of loans secured by one- to four-family residences located in the State of
Missouri. The Bank employs the same underwriting standards for purchased loans
as for loans originated by the Bank.
In addition, the Bank purchases mortgage-backed securities, consistent
with its asset/liability management objectives to complement its mortgage
lending activities. The Board believes that the slightly lower yield carried by
mortgage-backed securities is somewhat offset by the lower level of credit risk
and the lower level of overhead required in connection with these assets, as
compared to one- to four-family, non- residential and other types of loans. See
"--Investment Securities--Mortgage-backed Securities."
Loan originations during the year ended March 31, 2000 were greater
than the comparable period in the prior year. The Bank believes the increase was
due to an increased emphasis on the origination of loans and increased loan
demand within the Bank's market area, plus the availability of lower fixed-rate
interest on long-term loans.
11
<PAGE>
The following table shows the loan and mortgage-backed securities
origination, purchase, sale and repayment activities of the Bank for the periods
indicated.
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------
2000 1999 1998
--------- --------- ---------
(In Thousands)
<S> <C> <C> <C>
Originations by type:
--------------------
Adjustable rate:
One- to four-family.................................................. $ 4,769 $ 1,072 $ 3,367
Land................................................................. 1,855 1,525 333
Commercial real estate............................................... 15 2,215 1,140
Construction......................................................... -- -- 669
Consumer............................................................. 2,130 2,007 1,963
Commercial business.................................................. 417 930 --
--------- --------- ---------
Total adjustable-rate.............................................. 9,186 7,749 7,462
--------- --------- ---------
Fixed rate:
One- to four-family.................................................. 11,395 15,064 12,254
Land................................................................. 306 292 188
Commercial real estate............................................... -- 225 --
Construction......................................................... 3,357 1,964 3,351
Consumer............................................................. 6,068 4,247 4,398
Commercial business.................................................. 20 -- --
--------- --------- ---------
Total fixed-rate................................................... 21,146 21,792 20,191
--------- --------- ---------
Total loans originated............................................. 30,332 29,541 27,653
--------- --------- ---------
Purchases:
---------
One- to four-family.................................................. 423 1,212 1,048
Land................................................................. -- -- 184
Commercial real estate............................................... -- 450 --
Mortgage-backed securities - at cost................................. 2,362 -- 10,940
--------- --------- ---------
Total purchased.................................................... 2,785 1,662 12,172
--------- --------- ---------
Sales and Repayments:
--------------------
One- to four-family.................................................. 675 3,486 3,737
Mortgage-backed securities sold - at amortized cost.................. 361 2,769 8,176
--------- --------- ---------
Total sales........................................................ 1,036 6,255 11,913
--------- --------- ---------
Principal repayments................................................. 23,569 23,893 19,630
--------- --------- ---------
Total sales and repayments......................................... 24,605 30,148 31,543
--------- --------- ---------
Decrease (increase) in other items:
Loans in process..................................................... (715) 827 (1,669)
Deferred fees and discounts.......................................... (28) (19) (17)
Allowance for loan losses............................................ 7 (63) (89)
--------- --------- ---------
Net increase (decrease)............................................ $ 7,776 $ 1,800 $ 6,507
========= ========= =========
</TABLE>
12
<PAGE>
Asset Quality
General. When a borrower fails to make a required payment on a loan,
the Bank attempts to cause the delinquency to be cured by contacting the
borrower. In the case of loans secured by real estate, reminder notices are sent
to borrowers. If payment is late, appropriate late charges are assessed and a
notice of late charges is sent to the borrower. If the loan is in excess of 90
days delinquent, the loan will be referred to the Bank's legal counsel for
collection. In all cases, if the Bank believes that its collateral is at risk
and added delay would place the collectibility of the balance of the loan in
further question, management may refer loans for collection even sooner than the
90 days described above.
When a loan becomes more than 90 days delinquent, the Bank will place
the loan on non-accrual status and previously accrued interest income on the
loan is charged against current income. The loan will remain on a non-accrual
status as long as the loan is more than 90 days delinquent.
Delinquent consumer loans are handled in a similar manner as to those
described above; however, shorter time frames for each step apply due to the
type of collateral generally associated with such types of loans. The Bank's
procedures for repossession and sale of consumer collateral are subject to
various requirements under Missouri and federal consumer protection laws.
The following table sets forth the Bank's loan delinquencies by type,
by amount and by percentage of type at March 31, 2000. The amounts presented in
the table below represent the total remaining principal balances of the loans,
rather than the actual payment amounts which are overdue.
<TABLE>
<CAPTION>
Loans Delinquent For
----------------------------------------------------------------
60-89 Days 90 Days and Over Total Delinquent Loans
------------------------------- ------------------------------- -------------------------------
Percent Percent Percent
of Loan of Loan of Loan
Number Amount Category Number Amount Category Number Amount Category
------ ------ -------- ------ ------ -------- ------ ------ --------
(Dollars in Thousands)
Real Estate:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family.......... 7 $ 230 0.38% 3 $ 219 0.36% 10 $ 449 0.74%
Land......................... -- -- -- -- -- -- -- -- --
Commercial................... -- -- -- -- -- -- -- -- --
Construction................. -- -- -- -- -- -- -- -- --
Consumer....................... -- -- -- 2 11 0.10 2 11 0.10
Commercial business............ -- -- -- -- -- -- -- -- --
--------- -------- ------- ------- ------- -------- ------- ------ ------
Total....................... 7 $ 230 0.38% 5 $ 230 0.46% 12 $ 460 0.84%
========= ======== ======= ======= ======= ======== ======= ====== ======
</TABLE>
13
<PAGE>
Non-Performing Assets. The table below sets forth the amounts and
categories of non-performing assets in the Bank's loan portfolio. Loans are
placed on non-accrual status when the collection of principal and/or interest
become doubtful. For all years presented, the Bank has had no troubled debt
restructurings (which involve forgiving a portion of interest or principal on
any loans or making loans at a rate materially less than that of market rates).
Foreclosed assets include assets acquired in settlement of loans.
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------
2000 1999 1998
--------- --------- ---------
(In Thousands)
<S> <C> <C> <C>
Non-accruing loans
One- to four-family............................................. $ 100 $ 205 $ 220
Land............................................................ -- -- --
Commercial real estate.......................................... -- -- --
Construction.................................................... -- -- --
Consumer........................................................ 11 25 12
Commercial business............................................. -- -- --
--------- --------- ---------
Total......................................................... 111 230 232
--------- --------- ---------
Accruing loans delinquent 90 days or more
One- to four-family............................................. 119 47 --
Land............................................................ -- -- --
Commercial real estate.......................................... -- -- --
Construction.................................................... -- -- --
Consumer........................................................ -- -- --
Commercial business............................................. -- -- --
--------- --------- ---------
Total......................................................... 119 47 --
--------- --------- ---------
Foreclosed assets
One- to four-family............................................. -- -- --
Land............................................................ -- -- --
Commercial real estate.......................................... -- -- --
Construction.................................................... -- -- --
Consumer........................................................ 7 -- --
Commercial business............................................. -- -- --
--------- --------- ---------
Total......................................................... 7 -- --
--------- --------- ---------
Total non-performing assets........................................ $ 237 $ 277 $ 232
========= ========= =========
Total classified assets............................................ $ 628 $ 336 $ 501
========= ========= =========
Total non-performing assets as a percentage of total assets 0.17% .20%
Total non-performing loans as a percentage of total
loans receivable................................................ 0.30% .45% .36%
========= ========= =========
</TABLE>
For the year ended March 31, 2000 gross interest income which would
have been recorded had the non-accruing loans been current in accordance with
their original terms amounted to $20,000. The amount that was included in
interest income on such loans was $18,000 for the year ended March 31, 2000.
14
<PAGE>
Classified Assets. Federal regulations provide for the classification
of loans and other assets, such as debt and equity securities, considered by the
OTS to be of lesser quality, as "substandard," "doubtful" or "loss." An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard" with the added characteristic that
the weaknesses present make "collection or liquidation in full" on the basis of
currently existing facts, conditions and values, "highly questionable and
improbable." Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for losses in an
amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as "loss," it is required either to establish a specific
allowance for losses equal to 100% of that portion of the asset so classified or
to charge-off such amount. An institution's determination as to the
classification of its assets and the amount of its valuation allowances is
subject to review by the regulatory authorities, who may order the establishment
of additional general or specific loss allowances.
In connection with the filing of its periodic reports with the OTS and
in accordance with its classification of assets policy, the Bank regularly
reviews loans in its portfolio to determine whether such assets require
classification in accordance with applicable regulations. On the basis of
management's review of its assets, at March 31, 2000, the Bank had classified a
total of $628,000of its assets as substandard, -0- as doubtful, and $7,000 as
loss. At March 31, 2000, total classified assets comprised $635,000 or 5.11% of
the Bank's capital, or .46% of the Bank's total assets.
Other Loans of Concern. In addition to the non-performing and
classified loans set forth in the tables above, as of March 31, 2000, there were
no other loans classified by the Bank with respect to which known information
about the possible credit problems of the borrowers or the cash flows of the
security properties have caused management to have some doubts as to the ability
of the borrowers to comply with present loan repayment terms and which may
result in the future inclusion of such items in the non- performing asset
categories.
Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and changes in the nature and volume of its loan
activity, including those loans which are being specifically monitored by
management. Such evaluation, which includes a review of loans for which full
collectibility may not be reasonably assured, considers among other matters, the
loan classifications discussed above, the estimated fair value of the underlying
collateral, economic conditions, historical loan loss experience, the amount of
loans outstanding and other factors that warrant recognition in providing for an
adequate loan loss allowance.
Real estate properties acquired through foreclosure are recorded at the
lower of cost or fair value minus estimated cost to sell. If fair value at the
date of foreclosure is lower than the balance of the related loan, the
difference will be charged-off to the allowance for loan losses at the time of
transfer. Valuations are periodically updated by management and if the value
declines, a specific provision for losses on such
15
<PAGE>
property is established by a charge to operations. At March 31, 2000, the Bank
had no real estate properties acquired through foreclosure.
Although management believes that it uses the best information
available to determine the allowance, unforeseen market conditions could result
in adjustments and net earnings could be significantly affected if circumstances
differ substantially from the assumptions used in making the final
determination. Future additions to the Bank's allowance for loan losses will be
the result of periodic loan, property and collateral reviews and thus cannot be
predicted in advance. In addition, federal regulatory agencies, as an integral
part of the examination process, periodically review the Bank's allowance for
loan losses. Such agencies may require the Bank to increase the allowance based
upon their judgment of the information available to them at the time of their
examination. At March 31, 2000, the Bank had a total allowance for loan losses
of $304,000, representing 128.3% of total non-performing loans and .39% of the
Bank's loans, net. See Note 4 of the Notes to Consolidated Financial Statements.
16
<PAGE>
The distribution of the Bank's allowance for loan losses at the dates
indicated is summarized as follows:
<TABLE>
<CAPTION>
At March 31,
-------------------------------------------------------------------------------------------------
2000 1999 1998
------------------------------- ------------------------------- -------------------------------
Percent Percent Percent
of Loans of Loans of Loans
Loan in Each Loan in Each Loan in Each
Amount of Amounts Category Amount of Amounts Category Amount of Amounts Category
Loan Loss by to Total Loan Loss by to Total Loan Loss by to Total
Allowance Category Loans Allowance Category Loans Allowance Category Loans
-------------------- --------- -------------------- --------- -------------------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate:
One- to four-family....... 152 $60,675 74.75% $ 113 $54,122 75.24% $ 74 $50,646 78.54%
Land...................... 34 3,304 4.07 31 3,048 4.24 8 810 1.26
Commercial real estate.... 30 2,986 3.68 31 3,031 4.21 24 2,356 3.65
Construction.............. 3 3,214 3.96 7 2,380 3.31 13 3,967 6.15
Consumer..................... 63 10,191 12.56 49 9,350 13.00 32 6,705 10.40
Commercial business.......... 8 796 0.98 8 781 1.09 -- -- --
Unallocated.................. 14 -- -- 72 -- -- 97 -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total................... $ 304 $81,166 100.00% $ 311 $71,932 100.00% $ 248 $64,484 100.00%
======= ======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
The portion of the allowance to each loan category does not necessarily
represent the total available for losses within that category since the total
allowance is applicable to the entire loan portfolio.
17
<PAGE>
The following table sets forth an analysis of the Bank's allowance for
loan losses.
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------
2000 1999 1998
--------- --------- ---------
(In Thousands)
<S> <C> <C> <C>
Balance at beginning of period........................................... $ 311 $ 248 $ 158
Charge-offs:
-----------
One- to four-family................................................... -- -- --
Land.................................................................. -- -- --
Commercial real estate................................................ -- -- --
Construction.......................................................... -- -- --
Consumer.............................................................. (11) (3) (4)
Commercial business................................................... -- -- --
------- ------- -------
(11) (3) (4)
------- ------- --------
Recoveries:
----------
One- to four-family................................................... -- -- --
Land.................................................................. -- -- --
Commercial real estate................................................ -- -- --
Construction.......................................................... -- -- --
Consumer.............................................................. 3 -- --
Commercial business................................................... -- -- --
------- ------- -------
3 -- --
------- ------- -------
Net charge-offs.......................................................... (8) (3) (4)
Additions charged to operations.......................................... 1 66 94
------- ------- -------
Balance at end of period................................................. $ 304 $ 311 $ 248
======= ======= =======
Ratio of net charge-offs during the
period to average loans outstanding during the period................. 0.011% .004% .01%
======= ======= =======
Ratio of net charge-offs during the period to
average non-performing assets......................................... 5.22% 1.13% 1.98%
======= ======= =======
</TABLE>
Investment Activities
General. Hardin Federal must maintain minimum levels of investments
that qualify as liquid assets under OTS regulations. Liquidity may increase or
decrease depending upon the availability of funds and comparative yields on
investments in relation to the return on loans. Historically, the Bank has
generally maintained liquid assets at levels above the minimum requirements
imposed by the OTS regulations and at levels believed adequate to meet the
requirements of normal operations, including repayments of maturing debt and
potential deposit outflows. Cash flows projections are regularly reviewed and
updated to assure that adequate liquidity is maintained. At March 31, 2000, the
Bank's liquidity ratio (liquid assets as a percentage of net withdrawable
savings deposits with maturities of 1 year or less and current borrowings) was
33.8%. See "Regulation--Liquidity."
Federally chartered savings institutions have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions, federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally chartered savings institution is otherwise
authorized to make directly.
18
<PAGE>
Generally, the investment policy of the Bank, as established by the
Board of Directors, is to invest funds among various categories of investments
and maturities based upon the Bank's liquidity needs, asset/liability management
policies, investment quality, marketability and performance objectives.
Mortgage-backed Securities. The Bank purchases mortgage-backed
securities to supplement residential loan production and as part of its
asset/liability strategy. The type of securities purchased is based upon the
Bank's asset/liability management strategy and balance sheet objectives. For
instance, substantially all of the mortgage-backed investments purchased by the
Bank over the last several years have had adjustable rates of interest. The Bank
has invested primarily in federal agency securities, principally Freddie Mac,
Government National Mortgage Association ("GNMA") and Fannie Mae obligations. At
March 31, 2000, the Bank's investment in mortgage-backed securities totalled
$11.8 million or 8.5% of its total assets.
The Bank's available-for-sale mortgage-backed securities are reported
at fair value, with unrealized gains and losses excluded from earnings but
reported as a separate component of stockholders' equity. During the fiscal year
ended March 31, 2000, the Bank sold $361,000 of its mortgage-backed securities.
See Note 3 of the Notes to Consolidated Financial Statements.
The Fannie Mae, Freddie Mac and GNMA certificates are modified
pass-through mortgage-backed securities that represent undivided interests in
underlying pools of fixed-rate, or certain types of adjustable- rate,
single-family residential mortgages issued by these government-sponsored
entities. As a result, the interest rate risk characteristics of the underlying
pool of mortgages, i.e., fixed rate or adjustable rate, as well as prepayment
risk, are passed on to the certificate holder. Fannie Mae and Freddie Mac
provide the certificate holder a guarantee of timely payments of interest and
ultimate collection of principal, whether or not they have been collected.
GNMA's guarantee to the holder of timely payments of principal and interest is
backed by the full faith and credit of the U.S. government.
Mortgage-backed securities generally yield less than the loans that
underlie such securities, because of the cost of payment guarantees or credit
enhancements that reduce credit risk. In addition, mortgage- backed securities
are more liquid than individual mortgage loans and may be used to collateralize
obligations of the Bank. In general, mortgage-backed securities issued or
guaranteed by Fannie Mae and Freddie Mac are weighted at no more than 20% for
risk-based capital purposes, and mortgage-backed securities issued or guaranteed
by GNMA are weighted at 0% for risk-based capital purposes, compared to an
assigned risk weighting of 50% to 100% for whole residential mortgage loans.
These types of securities thus allow the Bank to optimize regulatory capital to
a greater extent than non-securitized whole loans.
While mortgage-backed securities carry a reduced credit risk as
compared to whole loans, such securities remain subject to the risk that a
fluctuating interest rate environment, along with other factors such as the
geographic distribution of the underlying mortgage loans, may alter the
prepayment rate of such mortgage loans and so affect both the prepayment speed,
and value, of such securities.
Investment Securities. At March 31, 2000, the Bank's investment
securities (including a $2.0 million investment in the common stock of the FHLB
of Des Moines) totalled $39.8 million, or 28.7% of its total assets. It is the
Bank's general policy to purchase U.S. Government securities and federal agency
obligations and other investment securities. See Note 2 of the Notes to
Consolidated Financial Statements.
OTS regulations restrict investments in corporate debt and equity
securities by the Bank. These restrictions include prohibitions against
investments in the debt securities of any one issuer in excess of 15%
19
<PAGE>
of the Bank's unimpaired capital and unimpaired surplus as defined by federal
regulations, which totalled $12.4 million as of March 31, 2000, plus an
additional 10% if the investments are fully secured by readily marketable
collateral. At March 31, 2000, the Bank was in compliance with this regulation.
See "Regulation--Federal Regulation of Savings Associations" for a discussion of
additional restrictions on the Bank's investment activities.
The following table sets forth the composition of the Bank's investment
portfolio, including mortgage-backed securities, at the dates indicated.
<TABLE>
<CAPTION>
At March 31,
--------------------------------------------------------------------------
2000 1999 1998
---------------------- ---------------------- ----------------------
Book % of Book % of Book % of
Value Total Value Total Value Total
--------- --------- --------- --------- --------- --------
(Dollars in Thousands)
Investment securities:
---------------------
<S> <C> <C> <C> <C> <C> <C>
Federal agency securities........... $ 32,821 59.73% $ -- --% $ -- --%
Revenue bonds....................... 1,054 1.92 38,206 60.40 31,651 56.15
Perpetual preferred stock........... 3,814 6.94 1,473 2.33 1,005 1.78
Other investments................... 104 0.19 4,840 7.65 -- --
--------- ------- --------- --------- --------- --------
Subtotal.......................... 37,793 68.78 44,519 70.37 32,656 57.93
FHLB stock.......................... 2,015 3.67 2,000 3.16 1,475 2.62
--------- ------- --------- --------- --------- --------
Total investment securities
and FHLB stock................... 39,808 72.45 $ 46,519 73.54% $ 34,131 60.55%
--------- ------- --------- --------- --------- --------
Average remaining life of investment
securities excluding FHLB stock... 9 years 8 years 9 years
Other interest-bearing assets:
-----------------------------
Interest-bearing deposits........... $ 3,332 6.06% $ 4,157 6.57% $ 3,225 5.72%
Mortgage-backed securities:
GNMA.............................. 2,053 3.74 1,118 1.77 4,446 7.89
Freddie Mac....................... 4,068 7.40 4,158 6.57 5,424 9.62
Fannie Mae........................ 5,685 10.35 7,308 11.55 9,145 16.22
--------- ------- --------- --------- --------- --------
Total mortgage-backed securities, net 11,806 21.49 12,584 19.89 19,015 33.73
--------- --------- ---------- -------- ---------- ----------
Total investment portfolio.......... $ 54,946 100.00% $ 63,260 100.00% $ 56,371 100.00%
========= ======= ========= ========= ========= ========
</TABLE>
20
<PAGE>
The composition and maturities of the investment securities portfolio,
excluding FHLB stock, are indicated in the following table.
<TABLE>
<CAPTION>
March 31, 2000
-----------------------------------------------------------------------------
Total Investment
Less Than 1 to 5 5 to 10 Over Book Securities
1 Year Years Years 10 Years Value Market Value
----------- ----------- ----------- ----------- ----------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Federal agency obligations.............. $ 26,122 $ -- $ -- $ 6,699 $ 32,821 $ 32,821
Revenue bonds........................... -- 618 436 -- 1,054 1,054
Perpetual preferred stock............... -- 1,913 1,901 -- 3,814 3,814
Other Investments....................... -- -- -- 104 104 104
--------- -------- --------- --------- --------- ---------
Total investment securities............. $ 26,122 $ 2,531 $ 2,337 $ 6,803 $ 37,793 $ 37,793
--------- -------- --------- --------- --------- ---------
Weighted average yield.................. 6.66% 6.24% 6.36% 6.38% 6.42% 6.42%
========= ======== ========= ========= ========= =========
</TABLE>
The Bank's investment securities portfolio at March 31, 2000, contained
tax-exempt securities consisting of local revenue bonds. No securities of any
issuer had an aggregate book value in excess of 10% of the Bank's retained
earnings, excluding those issued by the U.S. government, or its agencies.
Hardin Federal's investments, including the mortgage-backed and related
securities portfolio, are managed in accordance with a written investment policy
adopted by the Board of Directors.
OTS guidelines regarding investment portfolio policy and accounting
require insured institutions to categorize securities and certain other assets
as held for "investment," "sale," or "trading." In addition, effective April 1,
1994, the Bank adopted SFAS 115 which states that securities available for sale
are accounted for at fair value and securities which management has the intent
and the Bank has the ability to hold to maturity are accounted for on an
amortized cost basis. The Bank's investment policy has strategies for each type
of security. At March 31, 2000, the Bank had $28.7 million in mortgage-backed
securities and investment securities with maturities of less than five years
classified as available for sale. See Notes 2 and 3 of the Notes to the
Consolidated Financial Statements.
Sources of Funds
General. The Bank's primary sources of funds are deposits, receipt of
principal and interest on loans and securities, interest-earning deposits with
other banks, FHLB advances, and other funds provided from operations.
FHLB advances are used to support lending activities and to assist in
the Bank's asset/liability management strategy. Typically, the Bank does not use
other forms of borrowings. At March 31, 2000, the Bank had total FHLB advances
of $38.3 million. See "--Borrowings" and Note 7 of the Notes to Consolidated
Financial Statements.
Deposits. Hardin Federal offers a variety of deposit accounts having a
wide range of interest rates and terms. The Bank's deposits consist of savings
deposits, commercial demand, NOW, money market deposit and certificate accounts.
The certificate accounts currently range in terms from 90 days to five years.
21
<PAGE>
The Bank relies primarily on advertising, competitive pricing policies
and customer service to attract and retain these deposits. Currently, Hardin
Federal solicits deposits from its market area only, and does not use brokers to
obtain deposits. The flow of deposits is influenced significantly by general
economic conditions, changes in money market and prevailing interest rates and
competition.
The Bank has become more susceptible to short-term fluctuations in
deposit flows as customers have become more interest rate conscious. The Bank
endeavors to manage the pricing of its deposits in keeping with its
profitability objectives giving consideration to its asset/liability management.
The ability of the Bank to attract and maintain savings accounts and
certificates of deposit, and the rates paid on these deposits, has been and will
continue to be significantly affected by market conditions.
The following table sets forth the dollar amount of savings deposits in
the various types of deposit programs offered by the Bank for the periods
indicated.
<TABLE>
<CAPTION>
At March 31,
--------------------------------------------------------------------------
2000 1999 1998
---------------------- ---------------------- ----------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
--------- --------- --------- --------- --------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Transactions and Savings Deposits:(1)
---------------------------------
Commercial Demand................... $ 2,653 3.06% $ 1,919 2.30% $ 1,082 1.41%
Savings Accounts.................... 4,402 5.09 3,805 4.57 3,265 4.25
NOW Accounts........................ 8,783 10.15 6,852 8.22 4,258 5.53
Money Market....................... 7,033 8.12 6,584 7.90 5,901 7.68
Certificates........................ 63,694 73.58 64,167 77.01 62,378 81.13
--------- ------- --------- ------- --------- ------
Total deposit accounts.............. $ 86,565 100.00% $ 83,327 100.00% $ 76,884 100.00%
========= ======= ========= ====== ========= ======
</TABLE>
(1) See Note 6 of the Notes to Consolidated Financial Statements.
The following table indicates the amount of the Bank's certificates of
deposit and other deposits by time remaining until maturity as of March 31,
2000.
<TABLE>
<CAPTION>
Maturity
---------------------------------------
Over Over Over
3 Months 3 to 6 6 to 12 12
or Less Months Months Months Total
--------- --------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than $100,000.............. $ 40,466 $ 5,673 $ 1,715 $ 4,597 $ 52,451
Certificates of deposit of $100,000 or more............. 8,624 784 313 1,089 10,810
Public funds (1)........................................ 390 37 6 -- 433
--------- --------- --------- --------- ---------
Total certificates of deposit........................... $ 49,480 $ 6,494 $ 2,034 $ 5,686 $ 63,694
========= ========= ========= ========= =========
</TABLE>
(1) Deposits from governmental and other public entities, including deposits
greater than $100,000.
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<PAGE>
Borrowings. Hardin Federal's borrowings historically have consisted of
advances from the FHLB of Des Moines. Such advances may be made pursuant to
different credit programs, each of which has its own interest rate and range of
maturities. Federal law limits an institution's borrowings from the FHLB to 20
times the amount paid for capital stock in the FHLB, subject to regulatory
collateral requirements. At March 31, 2000, the Bank had $2.0 million of FHLB of
Des Moines stock. The Bank has the ability to purchase additional capital stock
from the FHLB. At March 31, 2000 and March 31, 1999, the weighted average
interest rate of the Bank's FHLB advances was 5.84% and 5.18%, respectively. For
additional information regarding the term to maturity and average rate paid on
FHLB advances, see Note 7 of the Notes to Consolidated Financial Statements and
"--Lending Activities."
The following table sets forth the maximum month-end balance and
average balance of FHLB advances.
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------
2000 1999 1998
-------------- -------------- -------------
(In Thousands)
<S> <C> <C> <C>
Maximum Balance:
---------------
FHLB advances............................................ $ 38,300 $ 40,000 $ 29,500
Average Balance:
---------------
FHLB advances............................................ $ 36,583 $ 37,458 $ 24,458
</TABLE>
Service Corporation Activities
As a federally chartered savings bank, Hardin Federal is permitted by
OTS regulations to invest up to 2% of its assets, or approximately $2.8 million
at March 31,2000, in the stock of, or loans to, service corporation
subsidiaries. Hardin Federal may invest an additional 1% of its assets in
service corporations where such additional funds are used for inner-city or
community development purposes and up to 50% of its total capital in conforming
loans to service corporations in which it owns more than 10% of the capital
stock. In addition to investments in service corporations, federal associations
are permitted to invest an unlimited amount in operating subsidiaries engaged
solely in activities in which a federal association may engage. At March 31,
2000, Hardin Federal had one subsidiary, Hardin Savings Service Corporation
("HSSC"). HSSC was established in 1993 for the purpose of offering credit life,
disability and accident insurance to its customers. At March 31, 2000, the
Bank's investment in HSSC was $50,000. For the year ended March 31, 2000, HSSC
had pre-tax income of approximately $14,000.
In November 1999, Hardin Federal Savings Bank established a
wholly-owned direct operating subsidiary, Hardin Investment, LLC. The
subsidiary's activities consists solely of investment portfolio management
activities.
REGULATION
General
Hardin Federal is a federally chartered savings bank, the deposits of
which are federally insured and backed by the full faith and credit of the
United States Government. Accordingly, the Bank is subject to
23
<PAGE>
broad federal regulation and oversight extending to all its operations. The Bank
is a member of the FHLB of Des Moines and is subject to certain limited
regulation by the Federal Reserve Board. As the savings and loan holding company
of the Bank, the Company also is subject to federal regulation and oversight.
The purpose of the regulation of the Company and other holding companies is to
protect subsidiary savings associations. The Bank is a member of the SAIF. The
deposits of the Bank are insured by the SAIF of the FDIC. As a result, the FDIC
has certain regulatory and examination authority over the Bank.
Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.
Federal Regulation of Savings Associations
The OTS has extensive authority over the operations of savings
associations. As part of this authority, the Bank is required to file periodic
reports with the OTS and is subject to periodic examinations by the OTS and the
FDIC. When these examinations are conducted by the OTS and the FDIC, the
examiners may require the Bank to provide for higher general or specific loan
loss reserves.
All savings associations are subject to a semi-annual assessment, based
upon the savings association's total assets. The Bank's OTS assessment for the
fiscal year ended March 31, 2000, was approximately $41,000.
The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including the Bank and the Holding
Company. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease-and-desist or removal orders and to
initiate injunctive actions. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the OTS. Except
under certain circumstances, public disclosure of final enforcement actions by
the OTS is required.
In addition, the investment, lending and branching authority of the
Bank is prescribed by federal laws, and regulations, and it is prohibited from
engaging in any activities not permitted by such laws and regulations. For
instance, no savings institution may invest in non-investment grade corporate
debt securities. In addition, the permissible level of investment by federal
associations in loans secured by non- residential real property may not exceed
400% of total capital, except with approval of the OTS. Federal savings
associations are also generally authorized to branch nationwide. The Bank is in
compliance with the noted restrictions.
The Bank's general permissible lending limit for loans-to-one-borrower
is equal to the greater of $500,000 or 15% of unimpaired capital and surplus
(except for loans fully secured by certain readily marketable collateral, in
which case this limit is increased to 25% of unimpaired capital and surplus). At
March 31, 2000, the Bank's lending limit under this restriction was $1.8
million. The Bank is in compliance with the loans-to-one-borrower limitation.
The OTS, as well as the other federal banking agencies, has adopted
guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, internal controls and audit systems, interest
rate risk exposure and compensation and other employee benefits. Any institution
which fails to comply with these standards must submit a capital compliance
plan. A failure to submit a plan or to
24
<PAGE>
comply with an approved plan will subject the institution to further enforcement
action. The OTS and the other federal banking agencies have also adopted
additional guidelines on asset quality and earnings standards. The guidelines
are designed to enhance early identification and resolution of problem assets.
The guidelines are not expected to materially effect the Bank.
Insurance of Deposits
The FDIC is an independent federal agency that insures the
deposits, up to prescribed statutory limits, of depository institutions. The
FDIC currently maintains two separate insurance funds: the Bank Insurance Fund
and the Savings Association Insurance Fund. As insurer of Hardin Federal's
deposits, the FDIC has examination, supervisory and enforcement authority over
Hardin Federal.
Hardin Federal's accounts are insured by the Savings Association
Insurance Fund to the maximum extent permitted by law. Hardin Federal pays
deposit insurance premiums based on a risk-based assessment system established
by the FDIC. Under applicable regulations, institutions are assigned to one of
three capital groups that are based solely on the level of an institution's
capital -- "well capitalized," "adequately capitalized," and "undercapitalized"
-- which are defined in the same manner as the regulations establishing the
prompt corrective action system, as discussed below. These three groups are then
divided into three subgroups which reflect varying levels of supervisory
concern, from those which are considered to be healthy to those which are
considered to be of substantial supervisory concern. The matrix so created
results in nine assessment risk classifications, with rates that until September
30, 1996 ranged from 0.23% for well capitalized, financially sound institutions
with only a few minor weaknesses to 0.31% for undercapitalized institutions that
pose a substantial risk of loss to the Savings Association Insurance Fund unless
effective corrective action is taken.
Under the Deposit Insurance Funds Act, which was enacted on September
30, 1996, the FDIC imposed a special assessment on each depository institution
with Savings Association Insurance Fund-assessable deposits which resulted in
the Savings Association Insurance Fund achieving its designated reserve ratio.
As a result, the FDIC reduced the assessment schedule for Savings Association
Insurance Fund members, effective January 1, 1997, to a range of 0% to 0.27%,
with most institutions, including Hardin Federal, paying 0%. This assessment
schedule is the same as that for the Bank Insurance Fund, which reached its
designated reserve ratio in 1995. In addition, since January 1, 1997, Savings
Association Insurance Fund members are charged an assessment of .065% of Savings
Association Insurance Fund-assessable deposits to pay interest on the
obligations issued by the Financing Corporation in the 1980s to help fund the
thrift industry cleanup. Bank Insurance Fund-assessable deposits have been
charged an assessment to help pay interest on the Financing Corporation bonds at
a rate of approximately .013% until the earlier of December 31, 1999 or the date
upon which the last savings association ceases to exist, after which time the
assessment will be the same for all insured deposits.
The Deposit Insurance Funds Act also contemplates the development of a
common charter for all federally chartered depository institutions and the
abolition of separate charters for national banks and federal savings
associations. It is not known what form the common charter may take and what
effect, if any, the adoption of a new charter would have on the operation of
Hardin Federal.
The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any
25
<PAGE>
condition imposed by an agreement with the FDIC. It also may suspend deposit
insurance temporarily during the hearing process for the permanent termination
of insurance, if the institution has no tangible capital. If insurance of
accounts is terminated, the accounts at the institution at the time of
termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC. Management is
aware of no existing circumstances that could result in termination of the
deposit insurance of Hardin Federal.
Capital Requirements.
The OTS capital regulations require savings institutions to meet three
capital standards: a 1.5% tangible capital standard, a 3.0% leverage (core
capital) standard, and an 8.0% risk-based capital standard. Core capital is
defined as common stockholders' equity (including retained earnings), certain
noncumulative perpetual preferred stock and related surplus, minority interests
in equity accounts of consolidated subsidiaries less intangibles other than
certain mortgage servicing rights ("MSRs") and purchased credit card
relationships. The OTS regulations require that, in meeting the tangible, core
and risk-based capital standards, institutions generally must deduct investments
in and loans to subsidiaries engaged in activities not permissible for a
national bank. In addition, the OTS prompt corrective action regulation provides
that a savings institution that has a leverage capital ratio of less than 4.0%
(3.0% for institutions receiving the highest CAMELS examination rating) will be
deemed to be "undercapitalized" and may be subject to certain restrictions.
The risk-based capital standard for savings institutions requires the
maintenance of total capital (which is defined as core capital and supplementary
capital) to risk-weighted assets of 8.0%. In determining the amount of
risk-weighted assets, assets and certain off-balance sheet assets items are
multiplied by a risk- weight of 0% to 100%, as assigned by the OTS capital
regulation based on the risks OTS believes are inherent in the type of asset.
The components of core capital are equivalent to those discussed earlier under
the 3.0% leverage standard. The components of supplementary capital currently
include cumulative preferred stock, long-term perpetual preferred stock,
mandatory convertible securities, subordinated debt and intermediate preferred
stock and, within specified limits, the allowance for loan losses. Overall, the
amount of supplementary capital included as part of total capital cannot exceed
100% of core capital.
The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
capital for purposes of calculating their risk-based capital requirements. A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200-basis point increase or
decrease in market interest rates divided by the estimated economic value of the
association's assets, as calculated in accordance with guidelines set forth by
the OTS. A savings association whose measured interest rate risk exposure
exceeds 2% must deduct an interest rate component in calculating its total
capital under the risk-based capital rule. The interest rate risk component is
an amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
association's assets. That dollar amount is deducted from an association's total
capital in calculating compliance with its risk-based capital requirement. Under
the rule, there is a two quarter lag between the reporting date of an
institution's financial data and the effective date for the new capital
requirement based on that data. A savings association with assets of less than
$300 million and risk-based capital ratios in excess of 12% is exempt from the
interest rate risk component, unless the OTS determines otherwise. The rule also
provides that the OTS may waive or defer
26
<PAGE>
an association's interest rate risk component on a case-by-case basis. Under
certain circumstances, a savings association may request an adjustment to its
interest rate risk component if it believes that the calculated interest rate
risk component, as calculated by the OTS, overstates its interest rate risk
exposure. In addition, certain "well-capitalized" institutions may obtain
authorization to use their own interest rate risk model to calculate their
interest rate risk component in lieu of the amount as calculated by the OTS. The
OTS has postponed the date that the component will first be deducted from an
institution's total capital.
At March 31, 2000, the Bank had tangible capital of $13.2 million, or
9.43% of adjusted total assets, which is approximately $11.1 million above the
minimum requirement of 1.5% of adjusted total assets in effect on that date. At
March 31, 2000, the Bank had core capital equal to $13.2 million, or 9.43% of
adjusted total assets, which is $7.6 million above the minimum leverage ratio
requirement of 4% as in effect on that date. At that date, the Bank had total
risk based capital of $13.5 million (including approximately $13.2 million in
core capital and $304,000 in qualifying supplementary capital) and risk-weighted
assets of $72.4 million (with no converted off-balance sheet assets); or total
capital of 18.63% of risk-weighted assets. This amount was $7.7 million above
the 8% requirement in effect on that date.
Prompt Corrective Regulatory Action
Each federal banking agency is required to implement a system of prompt
corrective action for institutions that it regulates. The federal banking
agencies have promulgated substantially similar regulations to implement this
system of prompt corrective action. Under the regulations, an institution shall
be deemed to be "well capitalized" if it has a total risk-based capital ratio of
10.0% or more, has a Tier I risk-based capital ratio of 6.0% or more, has a
leverage ratio of 5.0% or more and is not required to meet and maintain a
specific capital level for any capital measure;"adequately capitalized" if it
has a total risk-based capital ratio of 8.0% or more, has a Tier I risk-based
capital ratio of 4.0% or more, has a leverage ratio of 4.0% or more, or 3.0%
under certain circumstances, and does not meet the definition of "well
capitalized"; "undercapitalized" if it has a total risk-based capital ratio that
is less than 8.0%, has a Tier I risk-based capital ratio that is less than 4.0%
or has a leverage ratio that is less than 4.0%, or 3.0% under certain
circumstances; "significantly undercapitalized" if it has a total risk-based
capital ratio that is less than 6.0%, has a Tier I risk-based capital ratio that
is less than 3.0% or has a leverage ratio that is less than 3.0%; and
"critically undercapitalized" if it has a ratio of tangible equity to total
assets that is equal to or less than 2.0%.
A federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized and
may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or has received
in its most recent examination, and has not corrected, a less than satisfactory
rating for asset quality, management, earnings or liquidity. The OTS may not,
however, reclassify a significantly undercapitalized institution as critically
undercapitalized.
An institution generally must file a written capital restoration plan
that meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. Immediately upon becoming
undercapitalized, an institution shall face various mandatory and discretionary
restrictions on its operations.
27
<PAGE>
At March 31, 2000, the Bank was categorized as "well capitalized"under
the prompt corrective action regulations.
Standards for Safety and Soundness
The federal banking regulatory agencies have adopted regulatory
guidelines for all insured depository institutions relating to internal
controls, information systems and internal audit systems; loan documentation;
credit underwriting; interest rate risk exposure; asset growth; asset quality;
earnings; and compensation, fees and benefits. The guidelines outline the safety
and soundness standards that the federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes
impaired. If the OTS determines that the Bank fails to meet any standard
prescribed by the guidelines, it may require the Bank to submit to the agency an
acceptable plan to achieve compliance with the standard. OTS regulations
establish deadlines for the submission and review of safety and soundness
compliance plans.
Capital Distributions
OTS regulations govern capital distributions by savings institutions,
which include cash dividends, stock repurchases and other transactions charged
to the capital account of a savings institution to make capital distributions.
Under new regulations effective April 1, 1999, a savings institution must file
an application for OTS approval of the capital distribution if either (1) the
total capital distributions for the applicable calendar year exceed the sum of
the institution's net income for that year to date plus the institution's
retained net income for the preceding two years, (2) the institution would not
be at least adequately capitalized following the distribution, (3) the
distribution would violate any applicable statute, regulation, agreement or
OTS-imposed condition, or (4) the institution is not eligible for expedited
treatment of its filings. If an application is not required to be filed, savings
institutions which are a subsidiary of a holding company, as well as certain
other institutions, must still file a notice with the OTS at least 30 days
before the board of directors declares a dividend or approves a capital
distribution.
Liquidity
All savings associations, including the Bank, are required to maintain
an average daily balance of liquid assets equal to a certain percentage of the
sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. This liquid asset ratio requirement may
vary from time to time (between 4% and 10%) depending upon economic conditions
and savings flows of all savings associations. At the present time, the minimum
liquid asset ratio is 5%.
In addition, short-term liquid assets (e.g., cash, certain time
deposits, certain bankers acceptances and short-term United States Treasury
obligations) currently must constitute at least 1% of the association's average
daily balance of net withdrawable deposit accounts and current borrowings.
Penalties may be imposed upon associations for violations of either liquid asset
ratio requirement. At March 31, 2000, the Bank was in compliance with both
requirements, with an overall liquid asset ratio of 33.8% and a short-term
liquid assets ratio of 24.4%.
28
<PAGE>
Accounting
An OTS policy statement applicable to all savings associations
clarifies and re-emphasizes that the investment activities of a savings
association must be in compliance with approved and documented investment
policies and strategies, and must be accounted for in accordance with GAAP.
Under the policy statement, management must support its classification of and
accounting for loans and securities (i.e., whether held for investment, sale or
trading) with appropriate documentation.
The OTS has adopted an amendment to its accounting regulations, which
may be more stringent than GAAP, to require that transactions be reported in a
manner that best reflects their underlying economic substance and inherent risk
and that financial reports must incorporate any other accounting regulations or
orders prescribed by the OTS. The Bank is in compliance with these amended
rules.
Qualified Thrift Lender Test
All savings associations are required to meet a qualified thrift lender
test to avoid certain restrictions on their operations. A savings institution
that fails to become or remain a qualified thrift lender shall either convert to
a national bank charter or face the following restrictions on its operations.
These restrictions are: the association may not make any new investment or
engage in activities that would not be permissible for national banks; the
association may not establish any new branch office where a national bank
located in the savings institution's home state would not be able to establish a
branch office; the association shall be ineligible to obtain new advances from
any Federal Home Loan Bank; and the payment of dividends by the association
shall be under the rules regarding the statutory and regulatory dividend
restrictions applicable to national banks. Also, beginning three years after the
date on which the savings institution ceases to be a qualified thrift lender,
the savings institution would be prohibited from retaining any investment or
engaging in any activity not permissible for a national bank and would be
required to repay any outstanding advances to any Federal Home Loan Bank. In
addition, within one year of the date on which a savings association controlled
by a company ceases to be a qualified thrift lender, the company must register
as a bank holding company and follow the rules applicable to bank holding
companies. A savings institution may requalify as a qualified thrift lender if
it thereafter complies with the test.
Currently, the qualified thrift lender test requires that either an
institution qualify as a domestic building and loan association under the
Internal Revenue Code or that 65% of an institution's "portfolio assets" consist
of certain housing and consumer-related assets on a monthly average basis in
nine out of every 12 months. Assets that qualify without limit for inclusion as
part of the 65% requirement are loans made to purchase, refinance, construct,
improve or repair domestic residential housing and manufactured housing; home
equity loans; mortgage-backed securities where the mortgages are secured by
domestic residential housing or manufactured housing; Federal Home Loan Bank
stock; direct or indirect obligations of the FDIC; and loans for educational
purposes, loans to small businesses and loans made through credit cards. In
addition, the following assets, among others, may be included in meeting the
test based on an overall limit of 20% of the savings institution's portfolio
assets: 50% of residential mortgage loans originated and sold within 90 days of
origination; 100% of consumer loans; and stock issued by Freddie Mac or Fannie
Mae. Portfolio assets consist of total assets minus the sum of goodwill and
other intangible assets, property used by the savings institution to conduct its
business, and liquid assets up to 20% of the institution's total assets. At
March 31, 2000, the Bank was in compliance with the qualified thrift lender
test.
29
<PAGE>
Community Reinvestment Act
Savings associations are required to follow the provisions of the
Community Reinvestment Act of 1977, which requires the appropriate federal bank
regulatory agency, in connection with its regular examination of a savings
association, to assess the savings association's record in meeting the credit
needs of the community serviced by the savings associations, including low and
moderate income neighborhoods. The regulatory agency's assessment of the savings
association's record is made available to the public. Further, an assessment is
required of any savings associations which has applied, among other things, to
establish a new branch office that will accept deposits, relocate an existing
office or merge or consolidate with, or acquire the assets or assume the
liabilities of, a federally regulated financial institution. The Bank received a
"satisfactory" rating as a result of its most recent examination.
Activities of Associations and Their Subsidiaries
A savings association may establish operating subsidiaries to engage in
any activity that the savings association may conduct directly and may establish
service corporation subsidiaries to engage in certain pre- approved activities
or, with approval of the OTS, other activities reasonably related to the
activities of financial institutions. When a savings association establishes or
acquires a subsidiary or elects to conduct any new activity through a subsidiary
that the association controls, the savings association must notify the FDIC and
the OTS 30 days in advance and provide the information each agency may, by
regulation, require. Savings associations also must conduct the activities of
subsidiaries in accordance with existing regulations and orders.
The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices. Based upon that determination, the
FDIC or the OTS has the authority to order the savings association to divest
itself of control of the subsidiary. The FDIC also may determine by regulation
or order that any specific activity poses a serious threat to the Savings
Association Insurance Fund. If so, it may require that no Savings Association
Insurance Fund member engage in that activity directly.
Transactions with Affiliates
Savings associations must comply with Sections 23A and 23B of the
Federal Reserve Act relative to transactions with affiliates in the same manner
and to the same extent as if the savings association were a Federal Reserve
member bank. A savings and loan holding company, its subsidiaries and any other
company under common control are considered affiliates of the subsidiary savings
association under the Home Owners Loan Act. Generally, Sections 23A and 23B
limit the extent to which the insured association or its subsidiaries may engage
in certain covered transactions with an affiliate to an amount equal to 10% of
the institution's capital and surplus and place an aggregate limit on all
transactions with affiliates to an amount equal to 20% of capital and surplus,
and require that all transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term"covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guarantee and similar types of
transactions.
Any loan or extension of credit by the Bank to an affiliate must be
secured by collateral in accordance with Section 23A.
30
<PAGE>
Three additional rules apply to savings associations. First, a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies. Second, a savings association may not purchase or invest insecurities
issued by an affiliate, other than securities of a subsidiary. Third, the OTS
may, for reasons of safety and soundness, impose more stringent restrictions on
savings associations but may not exempt transactions from or otherwise abridge
Section 23A or 23B. Exemptions from Section 23A or 23B may be granted only by
the Federal Reserve, as is currently the case with respect to all FDIC-insured
banks.
The Bank's authority to extend credit to executive officers, directors
and 10% shareholders, as well as entities controlled by those persons, is
currently governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and
Regulation O thereunder. Among other things, these regulations require that
loans be made on terms and conditions substantially the same as those offered to
unaffiliated individuals and not involve more than the normal risk of repayment.
Regulation O also places individual and aggregate limits on the amount of loans
the Bank may make to those persons based, in part, on the Bank's capital
position, and requires certain board approval procedures to be followed. The OTS
regulations, with certain minor variances, apply Regulation O to savings
institutions.
Holding Company Regulation
The Company is a unitary savings and loan holding company subject to
regulatory oversight by the OTS. As such, the Company is required to register
and file reports with the OTS and is subject to regulation and examination by
the OTS. In addition, the OTS has enforcement authority over holding companies
and their non-savings association subsidiaries which also permits the OTS to
restrict or prohibit activities that are determined to be a serious risk to the
subsidiary savings association.
Federal law and regulation generally prohibit a savings and loan
holding company, without prior OTS approval, from acquiring more than 5% of the
voting stock of any other savings association or savings and loan holding
company or controlling the assets thereof. They also prohibit, among other
things, any director or officer of a savings and loan holding company, or any
individual who owns or controls more than 25% of the voting shares of the
Company from acquiring control of any savings association not a subsidiary of a
savings and loan holding company, unless the acquisition is approved by the OTS.
Until recently, a unitary savings and loan holding company was not
restricted as to the types of business activities in which it could engage,
provided that its subsidiary savings association continued to be a qualified
thrift lender. Recent legislation, however, restricts unitary saving and loan
holding companies not existing or applied for before May 4, 1999 to activities
permissible for a financial holding company as defined under the legislation,
including insurance and securities activities, and those permitted for a
multiple savings and loan holding company as described below. The Company has
certain grandfather rights under this legislation. Upon any non-supervisory
acquisition by the Company of another savings association as a separate
subsidiary, the Company would become a multiple savings and loan holding company
and would have extensive limitations on the types of business activities in
which it could engage. The Home Owner's Loan Act limits the activities of a
multiple savings and loan holding company and its non-insured institution
subsidiaries primarily to activities permissible for the bank holding companies
under Section 4(c)(8) of the Bank Holding Company Act, provided the prior
approval of the Office of Thrift Supervision is obtained, and to other
activities authorized by Office of Thrift Supervision regulation. Multiple
savings and loan holding companies are generally prohibited from acquiring or
retaining more than 5% of a non-subsidiary company engaged in activities other
than those permitted by the Home Owners. Loan Act.
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<PAGE>
The activities authorized by the Federal Reserve Board as permissible
for bank holding companies also must be approved by the OTS prior to being
engaged in by a multiple savings and loan holding company.
If the Bank fails the QTL test, the Company must obtain the approval of
the OTS prior to continuing after such failure, directly or through its other
subsidiaries, any business activity other than those approved for multiple
savings and loan holding companies or their subsidiaries. In addition, within
one year of such failure the Company must register as, and will become subject
to, the restrictions applicable to bank holding companies. The activities
authorized for a bank holding company are more limited than are the activities
authorized for a unitary or multiple savings and loan holding company. See
"--Qualified Thrift Lender Test."
Federal Securities Law
The stock of the Company is registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company is
subject to the information, proxy solicitation, insider trading restrictions and
other requirements of the SEC under the Exchange Act.
Company stock held by persons who are affiliates (generally officers,
directors and principal stockholders) of the Company may not be resold without
registration or unless sold in accordance with certain resale restrictions. If
the Company meets specified current public information requirements, each
affiliate of the Company is able to sell in the public market, without
registration, a limited number of shares in any three-month period.
Federal Reserve System
The Federal Reserve Board requires all depository institutions to
maintain non-interest bearing reserves at specified levels against their
transaction accounts (primarily checking, NOW and Super NOW checking accounts).
At March 31, 2000, the Bank was in compliance with these reserve requirements.
The balances maintained to meet the reserve requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity requirements that may be imposed
by the OTS. See "--Liquidity."
Savings associations are authorized to borrow from the Federal Reserve
Bank "discount window," but Federal Reserve Board regulations require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.
Federal Home Loan Bank System
The Bank is a member of the FHLB of Des Moines, which is one of 12
regional FHLBs, that administers the home financing credit function of savings
associations. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures established
by the board of directors of the FHLB. These policies and procedures are subject
to the regulation and oversight of the Federal Housing Finance Board. All
advances from the FHLB are required to be fully secured by sufficient collateral
as determined by the FHLB. In addition, all long-term advances are required to
provide funds for residential home financing.
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Des Moines. At March 31, 2000, the Bank had $2.0 million of FHLB stock,
which was in compliance with this requirement.
32
<PAGE>
In past years, the Bank has received substantial dividends on its FHLB stock.
Over the past five fiscal years such dividends have averaged 6.81% and were
6.40% for fiscal 2000. For the fiscal year ended March 31, 2000, dividends paid
by the FHLB of Des Moines to the Bank totaled approximately $129,000, which
constitutes a $5,000 increase over the amount of dividends received in fiscal
year 1999. No assurance can be given that such dividends will continue in the
future at such levels.
Under federal law, the FHLBs are required to provide funds for the
resolution of troubled savings associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of the Bank's FHLB stock may result in a corresponding
reduction in the Bank's capital.
Federal and State Taxation
Federal Taxation. Savings associations such as the Bank that met
certain definitional tests relating to the composition of assets and other
conditions prescribed by the Internal Revenue Code of 1986, as amended (the
"Code"), have been permitted to establish reserves for bad debts and to make
annual additions thereto which, within specified formula limits, were taken as a
deduction in computing taxable income for federal income tax purposes. The
amount of the bad debt reserve deduction for "non-qualifying loans" was computed
under the experience method. For tax years beginning before December 31, 1995,
the amount of the bad debt reserve deduction for "qualifying real property
loans" (generally, loans secured by improved real estate) was computed under
either the experience method or the percentage of taxable income method (based
on an annual election). If a savings association elected the latter method, it
could claim, each year, a deduction based on a percentage of taxable income,
without regard to actual bad debt experience.
Under the experience method, the bad debt reserve deduction is an
amount determined under a formula based generally upon the bad debts actually
sustained by the savings association over a period of years.
The percentage of taxable income method was repealed for years
beginning after December 31, 1995, and "large" associations, i.e., the quarterly
average of the association's total assets or of the consolidated group of which
it is a member, exceeds $500 million for the year, may no longer be entitled to
use the experience method of computing additions to their bad debt reserve. A
"large" association must use the direct write-off method for deducting bad
debts, under which charge-offs are deducted and recoveries are taken into
taxable income as incurred. Since the Bank is not a "large" association, the
Bank will continue to be permitted to use the experience method. The Bank will
be required to recapture (i.e., take into income) over a six-year period its
applicable excess reserves, i.e, the balance of its reserves for losses on
qualifying loans and nonqualifying loans, as of March 31, 1996, the close of the
last tax year beginning before January 1, 1996, over the greater of (a) the
balance of such reserves as of December 31, 1987 (pre-1988 reserves) or (b) in
the case of a bank which is not a "large" association, an amount that would have
been the balance of such reserves as of the close of the last tax year beginning
before January 1, 1996, had the bank always computed the additions to its
reserves using the experience method. Postponement of the recapture is possible
for a two-year period if an association meets a minimum level of mortgage
lending for 1996 and 1997. As of March 31, 2000, the Bank's bad debt reserve
subject to recapture over a six-year period totaled approximately $282,000.
33
<PAGE>
If an association ceases to qualify as a "bank" (as defined in Code
Section 581) or converts to a credit union, the pre-1988 reserves and the
supplemental reserve are restored to income ratably over a six-year period,
beginning in the tax year the association no longer qualifies as a bank. The
balance of the pre-1988 reserves are also subject to recapture in the case of
certain excess distributions to (including distributions on liquidation and
dissolution), or redemptions of, shareholders.
In addition to the regular federal income tax, corporations, including
savings associations such as the Bank, generally are subject to a minimum tax.
An alternative minimum tax is imposed at a minimum tax rate of 20% on
alternative minimum taxable income, which is the sum of a corporation's regular
taxable income (with certain adjustments) and tax preference items, less any
available exemption. The alternative minimum tax is imposed to the extent it
exceeds the corporation's regular income tax and net operating losses can offset
no more than 90% of alternative minimum taxable income. For taxable years
beginning after 1986 and before 1996, corporations, including savings
associations such as the Bank, were also subject to an environmental tax equal
to 0.12% of the excess of alternative minimum taxable income for the taxable
year (determined without regard to net operating losses and the deduction for
the environmental tax) over $2 million.
To the extent earnings appropriated to a savings association's bad debt
reserves for "qualifying real property loans" and deducted for federal income
tax purposes exceed the allowable amount of such reserves computed under the
experience method and to the extent of the Bank's supplemental reserves for
losses on loans ("Excess"), such Excess may not, without adverse tax
consequences, be utilized for the payment of cash dividends or other
distributions to a shareholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses). As of March 31, 2000, the Bank's excess for tax purposes totaled
approximately $1.6 million.
The Company and its subsidiaries file consolidated federal income tax
returns on a fiscal year basis using the accrual method of accounting. Savings
associations, such as the Bank, that file federal income tax returns as part of
a consolidated group were required by applicable Treasury regulations to reduce
their taxable income for purposes of computing the now expired percentage bad
debt deduction for losses attributable to activities of the non-savings
association members of the consolidated group that were functionally related to
the activities of the savings association member.
The Bank has not been audited by the IRS recently with respect to
federal income tax returns. In the opinion of management, any examination of
still open returns would not result in a deficiency which could have a material
adverse effect on the financial condition of the Bank.
Missouri Taxation. The State of Missouri has a corporate income tax;
however, savings associations are exempt from such tax. Missouri-based thrift
institutions, such as the Bank, are subject to a special financial institutions
tax, based on net income without regard to net operating loss carryforwards, at
the rate of 7% of net income as defined in the Missouri statutes. This tax is a
prospective tax for the privilege of the Bank exercising its corporate franchise
within the state, based on its net income for the preceding year. The tax is in
lieu of all other state taxes on thrifts, except taxes on real estate, tangible
personal property owned by the taxpayer and held for lease or rental to others,
certain payroll taxes, and sales and use taxes.
34
<PAGE>
Delaware Taxation. As a Delaware holding company, the Company is
exempted from Delaware corporate income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware. The Company is also
subject to an annual franchise tax imposed by the State of Delaware.
Competition
Hardin Federal faces strong competition, both in originating real
estate loans and in attracting deposits. Competition in originating real estate
loans comes primarily from commercial banks, credit unions and savings
institutions located in the Bank's market area. Commercial banks, credit unions
and savings institutions provide vigorous competition in consumer lending. The
Bank competes for real estate and other loans principally on the basis of the
quality of services it provides to borrowers, the interest rates and loan fees
it charges, and the types of loans it originates. See "Business--Lending
Activities."
The Bank attracts all of its deposits through its retail banking
offices, primarily from the communities in which those retail banking offices
are located. Therefore, competition for those deposits is principally from
retail brokerage offices, commercial banks, credit unions and savings
institutions located in these communities. The Bank competes for these deposits
by offering a variety of account alternatives at competitive rates and by
providing convenient business hours, branch locations and interbranch deposit
and withdrawal privileges.
The Bank serves primarily Ray and Clay Counties, Missouri. There are
six commercial banks, one savings institution, and one credit union which
compete for deposits and loans in Ray County, Missouri. In Clay County,
Missouri, there are approximately 36 commercial banks, 44 credit unions, and 10
savings institutions, other than Hardin Federal, which compete for deposits and
loans in Clay County, Missouri.
Employees
At March 31, 2000, the Bank had a total of 31 full-time and 5 part-time
employees. The Bank's employees are not represented by any collective bargaining
group. Management considers its employee relations to be good.
Executive Officers of the Company and the Bank Who Are Not Directors
Lyndon M. Goodwin. Mr. Goodwin, age 55, is currently Vice President of
the Bank responsible for the supervision of all lending operations of the Bank.
Prior to joining the Bank in 1994, Mr. Goodwin was a County Supervisor of the
United States Department of Agriculture, Farmer's Home Administration, for 28
years.
J. Michael Schwarz. Mr. Schwarz, age 56, joined the Bank in January
1997 as Vice President of Lending at the Excelsior Springs Branch. Mr. Schwarz
previously was employed as Executive Vice President of Lawson Bank, Lawson,
Missouri.
35
<PAGE>
Item 2. Description of Property
-----------------------
The Bank conducts its business through three offices, which are located
in Ray and Clay Counties, Missouri. The Bank owns its main office and its
Richmond and Excelsior Springs, Missouri branch offices. The following table
sets forth information relating to each of the Bank's offices as of March 31,
2000. The total net book value of the Bank's premises and equipment (including
land, buildings and leasehold improvements and furniture, fixtures and
equipment) at March 31, 2000 was approximately $1.8 million. See Note 5 of the
Notes to Consolidated Financial Statements.
Total
Approximate
Date Square Net Book Value at
Location Acquired Footage March 31, 2000
---------------------------- -------- ------- --------------
Main Office: 1963 4600 62,128
201 Northeast Elm Street
Hardin, Missouri
Branch Offices:(1)
201 North Jesse James Road 1990 2024 591,842
Excelsior Springs, Missouri
200 N. Spartan Drive 1998 6800 1,123,941
Richmond, Missouri
----------------
(1) The Bank constructed an approximate 6800 sq. foot branch office
facility located at 200 N. Spartan Drive, Richmond, Missouri, which opened for
business on March 31, 1998. At that time, the Bank closed its branch office
which was located at 208 West Main Street in Richmond, Missouri.
Hardin Federal believes that its current facilities are adequate to
meet the present and foreseeable needs of the Bank and the Holding Company.
The Bank maintains an on-line data base with an independent service
bureau servicing financial institutions.
Item 3. Legal Proceedings
-----------------
The Company and Hardin Federal are involved, from time to time, as
plaintiff or defendant in various legal actions arising in the normal course of
their businesses. While the ultimate outcome of these proceedings cannot be
predicted with certainty, it is the opinion of management, after consultation
with counsel representing Hardin Federal and the Company in the proceedings,
that the resolution of these proceedings should not have a material effect on
the Company's financial position or results of operations on a consolidated
basis.
36
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended March 31, 2000.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
-------------------------------------------------------------
Page 43 of the attached 2000 Annual Report to Shareholders is herein
incorporated by reference.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------
Pages 5 to 16 of the attached 2000 Annual Report to Shareholders are
herein incorporated by reference.
Item 7. Financial Statements
Pages 17 to 42 of the attached 2000 Annual Report to Shareholders are
herein incorporated by reference.
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
-----------------------------------------------------------
There has been no Current Report on Form 8-K filed within 24 months
prior to the date of the most recent financial statements reporting a change of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.
PART III
--------
Item 9. Directors and Executive Officers of the Registrant
--------------------------------------------------
Information concerning Directors of the Registrant is incorporated
herein by reference from the Company's definitive Proxy Statement for the Annual
Meeting of Shareholders scheduled to be held on July 27, 2000.
Item 10. Executive Compensation
----------------------
Information concerning executive compensation is incorporated herein by
reference from the Company's definitive Proxy Statement for the Annual Meeting
of Shareholders scheduled to be held on July 27, 2000.
Item 11. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders scheduled to be held on
July 27, 2000.
37
<PAGE>
Item 12. Certain Relationships and Related Transactions
----------------------------------------------
Information concerning certain relationships and transactions is
incorporated herein by reference from the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders scheduled to be held on July 27, 2000.
PART IV
-------
Item 13. Exhibits List and Reports on Form 8-K
-------------------------------------
(a) (1) Financial Statements:
-----------------------------
The following information appearing in the Registrant's Annual Report
to Shareholders for the year ended March 31, 2000, is incorporated by reference
in this Form 10-KSB Annual Report as Exhibit 13.
<TABLE>
<CAPTION>
Page in
Annual
Annual Report Section Report
--------------------- ------
<S> <C>
Report of Independent Auditors............................................................... 17
Consolidated Balance Sheets at March 31, 2000 and 1999....................................... 18
Consolidated Statements of Earnings for the Years ended March 31, 2000, 1999 and 1998........ 19
Consolidated Statements of Stockholders' Equity for the Years ended
March 31, 2000, 1999 and 1998............................................................... 20
Consolidated Statements of Cash Flows for the Years ended March 31, 2000,
1999 and 1998.............................................................................. 21
Notes to Consolidated Financial Statements................................................... 23
</TABLE>
(a) (2) Financial Statement Schedules:
--------------------------------------
All financial statement schedules have been omitted as the information
is not required under the related instructions or is inapplicable.
(a) (3) Exhibits:
-----------------
38
<PAGE>
Reference to
Regulation Prior Filing or
S-B Exhibit Exhibit Number
Number Document Attached Hereto
----------- -------------------------------------- -----------------
2 Plan of acquisition, reorganization, None
arrangement, liquidation or succession
3 Certificate of Incorporation and Bylaws *
4 Instruments defining the rights of *
security holders, including indentures
9 Voting trust agreement None
10.1 1995 Stock Option and Incentive Plan **
10.2 Employment Agreement with Robert W. King *
10.3 Employment Agreement with Karen K. *
Blankenship
10.4 Employee Stock Ownership Plan *
10.5 Recognition and Retention Plan **
10.6 Deferred Compensation Agreement *
10.7 Compensation Agreement with Directors *
11 Statement re: computation of per None
share earnings
12 Statement re: computation or ratios Not required
13 Annual Report to Security Holders 13
16 Letter re: change in certifying None
accountant
18 Letter re: change in accounting None
principles
21 Subsidiaries of Registrant 21
22 Published report regarding matters None
submitted to vote of security holders
39
<PAGE>
Reference to
Regulation Prior Filing or
S-B Exhibit Exhibit Number
Number Document Attached Hereto
----------- -------------------------------------- -----------------
23 Consent of experts and counsel 23
24 Power of Attorney Not Required
27 Financial Data Schedule 27
28 Information from reports furnished to None
State insurance regulatory authorities
99 Additional exhibits None
-------------------
*Filed on June 23, 1995, as exhibits to the Registrant's Form S-1
registration statement (Registration No. 33-93888), pursuant to the Securities
Act of 1933. All of such previously filed documents are hereby incorporated
herein by reference in accordance with Item 601 of Regulation S-B.
**Filed on March 18, 1996, as exhibits to the Registrant's definitive
proxy statement relating to the Registrant's special meeting of stockholders
held on April 16, 1996. All of such previously filed documents are hereby
incorporated herein by reference in accordance with Item 601 of Regulation S-B.
(b) Reports on Form 8-K:
------------------------
No current reports on Form 8-K were filed by the Company during the
three months ended March 31, 2000.
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: June 28, 2000 By: /s/ Robert W. King
-------------------------------
Robert W. King
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Robert W. King By: /s/ Ivan R. Hogan
-------------------------------------- ----------------------------
Robert W. King, President Ivan R. Hogan
Chief Executive Officer and Director Chairman of the Board
Date: June 28, 2000 Date: June 28, 2000
By: /s/ Karen K. Blankenship By: /s/ David K. Hatfield
-------------------------------------- ----------------------------
Karen K. Blankenship, Senior Vice David K. Hatfield, Director
President, Secretary and Director
(Principal Accounting Officer)
Date: June 28, 2000 Date: June 28, 2000
By: /s/ David D. Lodwick By: /s/ W. Levan Thurman
-------------------------------------- ----------------------------
David D. Lodwick, Director W. Levan Thurman, Director
Date: June 28, 2000 Date: June 28, 2000
By: /s/ William L. Homan
--------------------------------------
William L. Homan, Vice President,
Treasurer and Director
(Principal Financial Officer)
Date: June 28, 2000
<PAGE>
EXHIBIT INDEX
3 Certificate of Incorporation and Bylaws*
4 Instruments defining the rights of security holders, including indentures*
10.1 1995 Stock Option and Incentive Plan**
10.2 Employment Agreement with Robert W. King*
10.3 Employment Agreement with Karen K. Blankenship*
10.4 Employee Stock Ownership Plan*
10.5 Recognition and Retention Plan**
10.6 Deferred Compensation Agreement*
10.7 Compensation Agreement with Directors*
13 Annual Report to Security Holders
21 Subsidiaries of Registrant
23 Consent of experts and counsel
27 Financial Data Schedule
---------------
*Filed on June 23, 1995, as exhibits to the Registrant's Form S-1
registration statement (Registration No. 33-93888), pursuant to the Securities
Act of 1933. All of such previously filed documents are hereby incorporated
herein by reference in accordance with Item 601 of Regulation S-B.
**Filed on March 18, 1996, as exhibits to the Registrant's definitive
proxy statement relating to the Registrant's special meeting of stockholders
held on April 16, 1996. All of such previously filed documents are hereby
incorporated herein by reference in accordance with Item 601 of Regulation S-B.
