SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------- -------------------
Commission File Number 0-26560
HARDIN BANCORP, INC.
--------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 43-1719104
------------------------------ -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2nd and Elm Street, Hardin, Missouri 64035
- ---------------------------------------- -----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:(816) 398-4312
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's common stock
as of the latest practicable date.
Class Outstanding at September 30, 1996
- ---------------------------- ---------------------------------
Common stock, .01 par value 1,005,100
HARDIN BANCORP, INC. AND SUBSIDIARIES
CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets....................... 1
Consolidated Statements of Operations............. 2
Consolidated Statement of Stockholders' Equity.... 3
Consolidated Statements of Cash Flows............. 4-5
Notes to Consolidated Financial Statements........ 6-7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations.......................................... 8-12
PART II OTHER INFORMATION................................... 13-14
Signatures.......................................... 15
HARDIN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND MARCH 31, 1996
(Unaudited)
September 30, March 31,
1996 1996
-------------- -----------
Assets
------------
Cash $ 289,238 253,557
Interest bearing deposits 1,893,041 5,430,396
Investment securities - available for sale 11,749,250 6,362,850
Mortgage backed securities:
Held to maturity 14,588,790 16,298,987
Available for sale 6,301,821 7,906,862
Loans receivable, net 50,403,869 45,031,460
Accrued interest receivable:
Investment securities 306,398 116,562
Mortgage backed securities 157,808 188,532
Loans receivable 344,942 296,775
Premises and equipment 777,476 510,218
Stock in Federal Home Loan Bank (FHLB) of
Des Moines, at cost 742,000 742,000
Prepaid expenses and other assets 252,767 248,623
----------- ----------
Total assets $87,807,400 83,386,822
=========== ==========
Liabilities and Stockholders' Equity
- ---------------------------------------------------------
Liabilities:
Deposits $66,695,606 66,605,247
Advances from borrowers for taxes and insurance 458,024 223,752
Advances on FHLB line of credit 5,000,000 0
Accrued interest payable 58,218 30,385
Income taxes payable:
Current (120,408) 56,575
Deferred 427 48,000
Accrued expenses and other liabilities 978,221 387,922
----------- ----------
Total liabilities 73,070,088 67,351,881
----------- ----------
Stockholders' equity:
Serial preferred stock, $.01 par value;
500,000 shares authorized, none issued or outstanding 0 0
Common stock, $.01 par value: 3,500,000 shares
authorized; 1,058,000 shares issued; and
1,005,100, and 1,058,000 outstanding at
September 30 and March 31, 1996, respectively 10,580 10,580
Additional paid-in capital 10,055,448 10,055,448
Retained earnings 6,745,218 6,885,230
Unrealized gain or (loss) on available for
sale securities, net (237,872) (154,597)
Unearned employee stock ownership plan (761,720) (761,720)
Deferred recognition and retention plan (455,807) 0
Treasury stock (52,900 shares, at cost) (618,535) 0
----------- ----------
Total stockholders' equity 14,737,312 16,034,941
----------- ----------
Total liabilities and stockholders' equity $87,807,400 83,386,822
=========== ==========
See accompanying notes to consolidated financial statements.
1
HARDIN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Six months ended
September 30 September 30
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Interest income
Loans receivable $1,015,955 751,490 1,963,516 1,455,728
Mortgage backed securities 345,264 405,073 713,129 809,023
Investment securities 206,001 178,904 403,030 337,789
Other 29,999 0 90,064 0
---------- --------- --------- ---------
Total interest income 1,597,219 1,335,467 3,169,739 2,602,540
---------- --------- --------- ---------
Interest expense
Deposits 837,603 889,559 1,666,710 1,741,517
FHLB advances 77,561 4,288 145,849 12,876
---------- --------- --------- ---------
Total interest expense 915,164 893,847 1,812,559 1,754,393
---------- --------- --------- ---------
Net interest income 682,055 441,620 1,357,180 848,147
Provision for loan losses 8,590 0 16,090 0
---------- --------- --------- ---------
Net interest income after provision
for loan losses 673,465 441,620 1,341,090 848,147
Non-interest income
Service charges 18,656 16,496 39,221 32,056
Loan servicing fees 9,193 10,896 18,806 22,249
Loss on sale of investments and
mortgage backed securities (7,696) 0 (7,696) (2,886)
Other income 36,475 59,147 98,802 84,927
---------- --------- --------- ---------
Total non-interest income 56,628 86,539 149,133 136,346
---------- --------- --------- ---------
Non-interest expense
Compensation and benefits 264,668 184,658 495,694 349,610
Occupancy and equipment 25,538 26,242 51,424 48,529
Federal insurance premiums 38,062 38,598 75,833 77,258
SAIF special assessment 441,018 0 441,018 0
Data processing 22,441 21,875 44,773 44,025
Real estate owned 0 (3,050) 0 (3,050)
Other 146,728 90,389 279,749 170,796
---------- --------- --------- ---------
Total non-interest expense 938,455 358,712 1,388,491 687,168
---------- --------- --------- ---------
Earnings (loss) before income taxes (208,362) 169,447 101,732 297,325
Income tax expense (benefit) (77,161) 50,670 37,657 94,085
---------- --------- --------- ---------
Net earnings (loss) $ (131,201) 118,777 64,075 203,240
========== ========= ========= =========
Net earnings (loss) per common share:
Primary and fully diluted $(.14) 0.12 0.07 0.21
Weighted average common and common
equivalent shares outstanding 929,763 973,360 941,167 973,360
See accompanying notes to consolidated financial statements.
2
HARDIN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
Unrealized Unearned
Gain or Employee
Additional (Loss) on Stock Total
Common Paid-in Retained Securities, Ownership Deferred Treasury Stockholders'
Stock Capital Earnings net Plan RRP Stock Equity
------- ---------- --------- ----------- --------- ----------- ---------- -------------
Balance at March 31, 1996 $10,580 10,055,448 6,885,230 (154,597) (761,720) 0 0 16,034,941
Net earnings 0 0 64,075 0 0 0 0 64,075
Change in unrealized loss
on available-for-sale
securities, net of tax 0 0 0 (83,2750) 0 0 0 (83,275)
Repurchase of common stock 0 0 0 0 0 0 (1,116,685) (1,116,685)
Adoption of RRP 0 0 0 0 0 (498,150) 498,150 0
Amortization of RRP 0 0 0 0 0 42,343 0 42,343
Dividend declared ($.10
per share) 0 0 (204,087) 0 0 0 0 (204,087)
------- ---------- --------- -------- -------- -------- ---------- ----------
Balance at September 30,
1996 $10,580 10,055,448 6,745,218 (237,872) (761,720) (455,807) (618,535) 14,737,312
======= ========== ========= ======== ======== ======== ========== ==========
See accompanying notes to consolidated financial statements.
3
HARDIN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
------------ ----------
Operating Activities:
Net Earnings $ 64,075 203,240
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Provision for losses on loans 16,090 0
Depreciation 24,529 21,434
Premium accretion and amortization
of discounts and deferred loan fees, net 45,593 47,188
Net loss on sale of loans and
investment securities available for sale 7,696 2,886
Gain on sale of premises and equipment 0 (4,878)
Amortization of deferred Recognition
and Retention Plan (RRP) 42,343 0
Provision for deferred income taxes 1,538 0
Changes in assets and liabilities:
Interest receivable (207,279) (67,601)
Other assets (4,144) (3,689)
Accrued interest payable 27,833 (177)
Accrued expenses and other liabilities 595,588 35,383
Income taxes payable (176,983) 40,328
----------- ----------
Net cash provided by operating activities 436,879 274,114
----------- ----------
Investing Activities:
Net increase in loans receivable (3,675,677) (2,049,090)
Proceeds from maturities of certificates
of deposits in other institutions 0 100,000
Purchase of loans receivable (1,712,590) (3,091,346)
Principal payments on mortgage backed securities:
Available for sale 708,793 0
Held to maturity 1,677,957 2,212,546
Purchase of investment securities:
Available for sale (7,499,531) (1,500,000)
Held to maturity 0 (1,267,654)
Proceeds from maturities of investment securities:
Available for sale 2,000,000 0
Held to maturity 0 825
Proceeds from sales of mortgage backed
securities available for sale 855,712 0
Proceeds from sales of investment
securities available for sale 0 2,993,438
Purchase of office premises and equipment (291,787) (10,933)
Proceeds from sale of office premises and equipment 0 13,500
----------- ----------
Net cash used in investing activities $(7,937,123) (2,598,714)
----------- ----------
4
HARDIN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
------------ ------------
Financing Activities:
Net (decrease) increase in savings deposits $ 90,359 (1,844,676)
Proceeds from FHLB advances 5,000,000 1,000,000
Repayments of FHLB advances 0 (2,500,000)
Net increase in advances from borrowers
for taxes and insurance 234,272 183,234
Proceeds from issuance of stock, net of issuance costs 0 9,201,000
Payment of dividends (209,376) 0
Purchase of treasury stock (1,116,685) 0
----------- -----------
Net cash provided by financing activities 3,998,570 6,039,558
----------- -----------
(Decrease) increase in cash (3,501,674) 3,714,958
Cash at beginning of period 5,683,953 4,442,116
----------- -----------
Cash at end of period $ 2,182,279 $ 8,157,074
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 1,784,726 1,754,570
Income taxes, net of refunds $ 214,640 53,757
Noncash investing and financing:
Allocation of treasury stock to RRP $ 498,150 0
Dividends declared and payable $ 100,510 0
See accompanying notes to consolidated financial statements.
5
HARDIN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Hardin Bancorp, Inc.
Hardin Bancorp, Inc. (the "Holding Company") was incorporated under the
laws of the State of Delaware for the purpose of becoming the savings and
loan holding company of Hardin Federal Savings Bank, (the "Bank") in
connection with the Bank's conversion from a federally chartered mutual
savings bank to a federally chartered stock savings bank, pursuant to its
Plan of Conversion. On August 21, 1995, the Holding Company commenced a
Subscription and Community Offering of its shares in connection with the
conversion of the Bank (the "Offering"). The Offering was consummated and
the Holding Company acquired the Bank on September 28, 1995. The Holding
Company had no assets prior to the conversion and acquisition on
September 28, 1995.
The accompanying consolidated financial statements as of and for the six
months ended September 30, 1996 include the accounts of the Holding
Company and the Bank.
(2) Basis of Preparation
The accompanying unaudited consolidated financial statements were
prepared in accordance with instructions for Form 10-QSB. To the extent
that information and footnotes required by generally accepted accounting
principles for complete financial statements are contained in the audited
financial statements included in the Holding Company's Annual Report for
the year ended March 31, 1996, such information and footnotes have not
been duplicated herein. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, which are necessary for the
fair presentation of the interim financial statements have been included.
The statements of operations for the six month period ended September 30,
1996 are not necessarily indicative of the results which may be expected
for the entire year. The March 31, 1996 consolidated balance sheet has
been derived from the audited consolidated financial statements as of
that date.
(3) Earnings Per Share
Earnings per share of common stock have been determined by dividing net
earnings for the period by the weighted average number of shares of
common stock and common stock equivalents outstanding, less treasury
shares and unallocated ESOP shares. Stock options are regarded as common
stock equivalents and are therefore considered in both primary and fully
diluted earnings per share calculations. Common stock equivalents are
computed using the treasury stock method.
Earnings per share amounts for the three and six month periods ended
September 30, 1995 are based upon shares issued September 30, 1995,
exclusive of the shares issued to the ESOP, as though those shares were
outstanding for the entire period. The computation does not reflect the
pro forma effects of the investment income that would have been earned
had the net proceeds for the conversion been received at the beginning of
the three or six month period.
6
(4) Stockholders' Equity and Stock Conversion
The Bank converted from a federally chartered mutual savings bank to a
federally chartered stock savings bank pursuant to its Plan of Conversion
which was approved by the Bank's members on September 21, 1995. The
conversion was effective on September 28, 1995 and resulted in the
issuance of 1,058,000 shares of common stock (par value $0.01) at $10.00
per share for a gross sales price of $10,580,000. Costs related to
conversion (primarily underwriters' commissions, printing, and
professional fees) aggregated $532,600 and were deducted to arrive at the
net proceeds of $10,047,400. The Holding Company established an employee
stock ownership trust which purchased 84,640 shares of common stock of
the Holding Company at the issuance price of $10.00 per share with funds
borrowed from the holding company.
(5) Employee Stock Ownership Plan (ESOP)
All employees meeting age and service requirements are eligible to
participate in an ESOP established on September 28, 1995. Contributions
made by the Bank to the ESOP are allocated to participants by a formula
based on compensation. Participant benefits become 100 percent vested
after five years. The ESOP purchased 84,640 shares in the Bank's
conversion. ESOP expense for the six month period ended September 30,
1996 was $73,267.
(6) Recognition and Retention Plan (RRP)
On April 16, 1996, the shareholders approved adoption of a RRP whereby
42,320 shares of common stock were authorized to be purchased by the
plan. At September 30, 1996, 35,972 shares have been awarded to plan
participants. The cost of these shares will be amortized as compensation
expense over the five year vesting period.
7
HARDIN BANCORP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
- -------
Hardin Bancorp, Inc. (the "Company") was incorporated under the laws of the
state of Delaware to become a savings bank holding company with Hardin Federal
Savings Bank (the "Bank") of Hardin, Missouri, as its subsidiary. The holding
company was incorporated at the direction of the Board of Directors of the Bank,
and on September 28, 1995, acquired all of the capital stock of the Bank upon
its conversion from mutual to stock form (the "conversion"). Prior to the
conversion, the holding company did not engage in any material operations.
Hardin Federal Savings Bank was originally founded in 1888 as a Missouri
chartered savings and loan association located in Hardin, Missouri. On March
21, 1995, the Bank members voted to convert the Bank to a Federal mutual
charter. The Bank conducts its business through its main office in Hardin, Ray
County, and two full service branch offices located in Richmond, Ray County, and
Excelsior Springs, Clay County, Missouri. Deposits are insured by the Federal
Deposit Insurance Corporation (FDIC) to the maximum allowable.
The Bank is principally engaged in the business of attracting retail savings
deposits from the general public and investing those funds in first mortgage
loans on owner occupied, single-family residential loans, commercial real estate
loans, mortgage backed securities, U.S. Government and agency securities, and
insured interest bearing deposits. The Bank also originates consumer loans for
the purchase of automobiles, home improvement, and home equity lines of credit.
The most significant outside factors influencing the operations of the Bank and
other financial institutions include general economic conditions, competition in
the local market place and the related monetary and fiscal policies of agencies
that regulate financial institutions. More specifically, the cost of funds
primarily consisting of insured deposits is influenced by interest rates on
competing investments and general market rates of interest, while lending
activities are influenced by the demand for real estate financing and other
types of loans, which in turn is affected by the interest rates at which such
loans may be offered and other factors affecting loan demand and funds
availability.
The deposits of the Bank are presently insured by the Savings Association
Insurance Fund (SAIF), which together with the Bank Insurance Fund (BIF), are
the two insurance funds administered by the FDIC. In the third quarter of 1995
the FDIC lowered the premium schedule for BIF-insured institutions in
anticipation of the BIF achieving its statutory reserve ratio. The reduced
premium created a significant disparity in deposit insurance expense, causing a
competitive advantage for BIF members. Legislation enacted on September 30,
1996, provided for a one-time special assessment of .657% of the Bank's SAIF
insured deposits at March 31, 1995. The purpose of the assessment is to bring
the SAIF to its statutory reserve ratio. Based on the above formula, the Bank's
SAIF assessment of $441,018 was recorded in the quarter ended September 30,
1996. Although the special one-time assessment significantly increased non-
interest expense for the quarter, the anticipated reduction in the premium
schedule will reduce the Bank's Federal Insurance premiums for the future
periods.
RELATIVE LEGISLATION
- --------------------
The Congress is now expected to consider legislation requiring all Federal
thrift institutions, such as the Bank, to either convert to a national bank or a
state depository institution by January 1, 1998. In addition, the Company might
no longer be regulated as a thrift holding company, but rather as a bank
holding
8
company. The Office of Thrift Supervision (OTS) also might be abolished and its
functions transferred among the Federal banking regulators.
Certain aspects of the legislation remain to be resolved and therefore no
assurance can be given as to whether or in what form the legislation will be
enacted or its effect on the Company and the Bank.
Under Section 593 of the Code, until the first tax year beginning on or after
January 1, 1996, thrift institutions such as the Bank, which met certain
definitional test primarily relating to their assets and the nature of their
business, were permitted to establish a tax reserve for bad debts and to make
annual additions thereto, which additions, within specified limitations, could
be deducted in arriving at their taxable income. The Bank's deduction with
respect to "qualifying loans," which are generally loans secured by certain
interests in real property, were computed using an amount based on the Bank's
actual loss experience (the "Experience Method"), or a percentage equal to 8.0%
of the Bank's taxable income (the "PTI Method"), computed without regard to this
deduction and with additional modifications and reduced by the amount of any
permitted addition to the non-qualifying reserve.
Under recently enacted legislation, the PTI Method was repealed. If a Bank is
not a "large" bank, i.e., the quarterly average of the Bank's total assets or of
the consolidated group of which it is a member exceeds $500 million for the
year, the Bank will continue to be permitted to use the Experience Method. In
addition, the Bank is required to recapture (i.e., take into income) over a
multi-year period its "applicable excess reserves", i.e., the balance of its
reserve for losses on qualifying loans and non-qualifying loans, as of the close
of its last tax year beginning before January 1, 1996, over the greater of (a)
the balance of such reserves as of December 31, 1987 or (b) in the case of a
bank which is not a "large" bank, an amount that would have been the balance of
such reserves as of the close of its last tax year beginning before January 1,
1996, had the Bank always computed the additions to its reserves using the
experience method. The Bank would not be required to recapture its supplemental
reserves or its pre-1988 reserves, even if the Bank later became a "large" bank.
Under the legislation, such recapture requirements would be suspended for each
of two successive taxable years beginning January 1, 1997 if the principal
amount of residential loans made by the Bank during each such year is not less
than the average of the principal amounts of such loans made by the Bank during
its six taxable years preceding January 1, 1996. As of September 30, 1996, the
Bank's bad debt reserve subject to recapture over a six-year period totaled
approximately $453,028.
If the Bank ceases to qualify as a "bank" (as defined in Code Section 581) or
converts to a credit union, the pre-1988 reserves and supplemental reserves 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 stockholders. See "Regulation" and "Regulation-Federal and State
Taxation-Federal Taxation."
FINANCIAL CONDITION
- -------------------
Consolidated assets of Hardin Bancorp, Inc. were $87,807,400 as of September 30,
1996, an increase of $4,420,578 as compared to March 31, 1996. At September 30,
1996, total stockholders' equity was $14,737,312, a decrease of $1,297,629 when
compared to stockholders' equity at March 31, 1996. The increase in assets was
due to growth in investment securities and the loan portfolio which was funded
primarily by a $5,000,000 increase in Federal Home Loan Bank advances. The
decrease in stockholders' equity was a result of the Company purchasing 52,900
shares of its common stock for $618,535, the payment of cash dividends on common
stock in the amount of $209,376, and the purchase of 42,320 shares of common
stock by the Hardin Bancorp, Inc. Recognition and Retention Plan at a cost of
$498,150. Cash, interest bearing deposits, and investment securities increased
to $13,931,529 at
9
September 30, 1996, from $12,046,803 on March 31, 1996, an increase of
$1,884,726. Mortgage backed securities decreased $3,315,238 to $20,890,611 at
September 30, 1996, from $24,205,849 on March 31, 1996.
Loans receivable increased to $50,403,869 on September 30, 1996, from
$45,031,460 on March 31, 1996, an increase of $5,372,409. The decrease in
mortgage backed securities and the increase in loans receivable reflect the
Bank's plan to increase the mortgage and consumer loan portfolios and decrease
the level of mortgage backed securities.
Deposits totaled $66,695,606 on September 30, 1996, an increase from $66,605,247
on March 31, 1996. The increase of $90,359 is primarily due to a special
certificate of deposit (CD) offer during the quarter.
RESULTS OF OPERATIONS
- ---------------------
For the second quarter ended September 30, 1996, the Company experienced a loss
in the amount of $131,201 compared to earnings in the amount of $118,777 for the
comparable period in 1995. The decrease in earnings was due to the payment of a
one-time special assessment in the amount of $441,018, pre-tax, to recapitalize
the SAIF.
The long anticipated one-time special assessment became due when President
Clinton signed the Omnibus Appropriations Bill on September 30, 1996, which
required institutions insured by the Federal Deposit Insurance Corporation's
(FDIC) SAIF to pay 65.7 cents for every $100 of deposits held on March 31, 1995.
Net interest income after provision for loan losses for the second quarter ended
September 30, 1996, was $673,465 compared to $441,620 for the second quarter of
1995, an increase of $231,845. The increase is primarily due to the improvement
in the net interest margin from 2.38% for the quarter ended September 30, 1995,
to 3.15% for the quarter ended September 30, 1996. The improvement in net
interest income is primarily the result of an increase in interest earning
assets due to the investment of the net proceeds of the Bank's conversion to
stock.
Non-interest income for the second quarter of 1996 totaled $56,628 compared to
$86,539 for the second quarter of 1995. The decrease was due to a loss
recognized on the sale of mortgage backed securities of $7,696 in 1996, and
the elimination of the dividend received on the Bank's investment in its former
data processing center.
The Company's non-interest expense for the second quarter of 1996 totaled
$938,455 compared to $358,712 in the comparable quarter in 1995, an increase of
$579,743. The increase was a result of the one-time special assessment to
recapitalize the SAIF in the amount of $441,018, an increase in compensation
expense of $80,010 due to employee stock benefit plans, and other non-interest
expense rising $56,339 due to the cost of the Company's annual meeting and other
expenses related to becoming a public company.
Net earnings for the six months ended September 30, 1996, were $64,075 compared
to $203,240 for the six months ended September 30, 1995, a decrease of $139,165.
The decrease in earnings for the period was primarily due to the non-interest
expense related to the one-time special Federal Insurance assessment in the
amount of $441,018. Net earnings for the semi-annual period ended September 30,
1996, would have been $341,933 without the SAIF assessment.
Net interest income after provision for loan losses for the six months ended
September 30, 1996, was $1,341,090 compared to $848,147 for the six months ended
September 30, 1995, an increase of $492,943.
10
The increase in net interest income is due to the investment of the net proceeds
from the Bank's conversion to stock in the Bank's loan and securities
portfolios.
Non-interest income increased from $136,346 for the six months ended September
30, 1995, to $149,133 for the semi-annual period ended September 30, 1996. The
increase was due to a gain on the sale of the Bank's former data processing
center, which was partially off-set by an increase in losses taken on the sale
of mortgage backed securities.
The Company's non-interest expense for the six months ended September 30, 1996,
was $1,388,491 compared to $687,168 for the six months ended September 30, 1995,
an increase of $701,323. The increase was due to the one-time special SAIF
assessment of $441,018, compensation expense increasing $146,084 due to the
implementation of employee stock benefit plans, expenses associated with the
annual meeting of stockholders, and additional expenses related to becoming a
public company.
PROVISION FOR LOAN LOSSES
- -------------------------
The provision for loan losses is based on the periodic analysis of the loan
portfolio by management. In establishing the provision, management considers
numerous factors including general economic conditions, loan portfolio
condition, prior loss experience, and independent analysis. The provision for
loan losses for the three months ended September 30, 1996, was $8,590, and for
the six months ended September 30, 1996, was $16,090. Based upon the analysis
of the addition to established allowances and the composition of the loan
portfolio, management concluded that the allowance is adequate. While current
economic conditions in the Bank's market are stable, future conditions will
dictate the level of future allowances for losses on loans.
NONPERFORMING ASSETS
- --------------------
On September 30, 1996, nonperforming assets were $163,044 compared to $134,000
on June 30, 1996. At September 30, 1996, the Bank's allowance for loan losses
was $147,130, or 91% of nonperforming assets.
Loans are considered nonperforming when the collection of principal and/or
interest is not probable, or in the event payments are more than 90 days
delinquent.
Allowance for loan losses was .292% of total loans as of September 30, 1996.
CAPITAL RESOURCES
- -----------------
The Bank is subject to three capital to asset requirements in accordance with
Office of Thrift Supervision (OTS) regulations. The following table is a
summary of the Bank's regulatory capital requirements versus actual capital as
of September 30, 1996:
CAPITAL REQUIREMENTS:
Actual Required Excess
Amount/Percent Amount/Percent Amount/Percent
(Dollars in Thousands)
Tangible Capital $10,979/12.92% $1,274/1.50% $9,705/11.42%
Core Leverage Capital $10,979/12.92% $2,548/3.00% $8,431/09.92%
Risk-Based Capital $11,126/31.22% $2,851/8.00% $8,275/23.22%
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LIQUIDITY
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The Bank's principal sources of funds are deposits, principal and interest
payments on loans, deposits in other insured institutions, and investment
securities. While scheduled loan repayments and maturing investments are
relatively predictable, deposit flows and early loan payments are more
influenced by interest rates, general economic conditions and competition.
Additional sources of funds may be obtained from the Federal Home Loan Bank of
Des Moines by utilizing numerous available products to meet funding needs.
The Bank is required to maintain minimum levels of liquid assets as defined by
regulations. The required percentage is currently five percent of net
withdrawable savings deposits and borrowings payable on demand or in one year or
less. The Bank has maintained its liquidity ratio at levels exceeding the
minimum requirement. The eligible liquidity ratios at June 30, 1996, and
September 30, 1996, were 6.79% and 5.71% respectively.
In light of the competition for deposits, the Bank may utilize the funding
sources of the Federal Home Loan Bank of Des Moines (FHLB) to meet loan demand
in accordance with the Bank's growth plans. The wholesale funding sources may
allow the Bank to obtain a lower cost of funding and create a more efficient
liability match to the respective assets being funded.
For purposes of the cash flows, all short-term investments with a maturity of
three months or less at date of purchase are considered cash equivalents. Cash
and cash equivalents for the periods ended September 30, 1996 and 1995 were
$2,182,279 and $8,157,074 respectively. The decrease was primarily due to the
net cash used in investing activities for loan origination, loan purchases, and
the purchase of investment securities off-set by borrowings from FHLB.
Net cash provided by operating activities increased from $274,114 at September
30, 1995, to $436,879 at September 30, 1996. The increase was due to improved
net earnings, exclusive of the SAIF assessment, and normal adjustments to
accrued income and expense items.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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None.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On July 25, 1996, the annual meeting of stockholders was held at the
American Legion Hall, located at 103 West Elm Street, Hardin, Missouri.
The meeting was conducted with a quorum present in person, or by proxy.
Matters which were submitted to and approved by a majority of
stockholders were as follows:
1. The election of two directors of the Company for three year terms.
Robert W. King received 797,009 votes for, and 13,400 votes
withheld. David D. Lodwick received 789,459 votes for, and 20,950
votes withheld. There were no broker non-votes.
The election of one director of the Company for a two year term.
William L. Homan received 787,259 votes for, and 23,150 votes
withheld. There were no broker non-votes.
The election of one director of the Company for a one year term.
Karen K. Blankenship received 786,370 votes for, and 24,039 votes
withheld. There were no broker non-votes.
2. The ratification of the appointment of KPMG Peat Marwick LLP as the
auditors of the Company for the fiscal year ending March 31, 1997.
Votes for KPMG Peat Marwick LLP were 800,409, votes against were
900, and 9,100 abstained.
Item 5. Other Information
-----------------
During July 1996, the Company purchased 7,080 shares of the Company's
common stock at an aggregate purchase price $82,020. As of September
30, 1996, the Company held 52,900 shares of its common stock as
treasury stock at an aggregate purchase price of $618,535.
On September 19, 1996, the Company's Board of Directors authorized the
purchase of an additional 50,255 shares, to be acquired over the next
twelve months, and notified The Office of Thrift Supervision (OTS) in
compliance with OTS regulations.
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Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits:
27 - Financial Data Schedule
Reports on Form 8-K:
None.
14
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARDIN BANCORP, INC.
Registrant
Date: November 14, 1996 /s/ Robert W. King
----------------------- ---------------------------------------------
Robert W. King, President and Chief
Executive Officer (Duly Authorized
Officer)
Date: November 14, 1996 /s/ Karen K. Blankenship
----------------------- --------------------------------------
Karen K. Blankenship, Senior Vice
President and Secretary (Principal
Financial Officer)
15