UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
(Mark One)
( x ) Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Period Ended June 30, 1997.
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(_____) Transition Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ___ to ___.
Commission File Number: 0-18284
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HOMECORP, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 36-3680814
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(State of Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification Number
1107 East State Street, Rockford, IL 61104-2259
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(Address of Principal Executive Offices) (ZIP Code)
815-987-2200
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(Issuer's Telephone Number, including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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______
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As of JUNE 30, 1997 there were 1,693,052 issued and outstanding shares of the
Issuer's Common Stock.
HOMECORP, INC.
AND SUBSIDIARY
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets as of June 30, 1997
(unaudited) and December 31, 1996 1
Statements of Earnings
(unaudited) for the three and six months
ended June 30, 1997 and 1996 2
Statements of Cash Flows
(unaudited) for the three and six months
ended June 30, 1997 and 1996 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 6
Part II. Other Information
Item 4. Submission of Matters t Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures
CONSOLIDATED BALANCE SHEETS (UNAUDITED) HOMECORP, INC.
(IN THOUSANDS) AND SUBSIDIARY
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June 30, December 31,
1997 1996
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ASSETS:
Cash and cash equivalents:
Cash and non-interest bearing deposits $ 5,558 $ 13,959
Interest bearing deposits 1,096 181
Federal funds sold - -
Total cash and cash equivalents 6,654 14,140
Securities available for sale, at fair value 10,998 12,497
Investment securities (approximate market value of
$6,377 in 1997 and $5,471 in 1996) 6,501 5,502
Mortgage-backed securities
(approximate market value of
$16,991 in 1997 and $18,577 in 1996) 17,229 18,859
Federal Home Loan Bank Stock, at cost 1,637 2,079
Loans receivable, net 264,552 259,140
Mortgage loans held for sale 2,299 1,872
Real estate acquired in settlement of loans 9,383 9,648
Investment in real estate developments 5,763 5,095
Premises and equipment 3,673 3,869
Other assets, principally accrued interest 2,919 3,123
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Total Assets $331,608 $335,824
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LIABILITIES:
Deposits $304,671 $311,754
Borrowed funds 2,000 -
Advance payments by borrowers for taxes and insurance 1,171 1,330
Other liabilities 2,077 1,882
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Total Liabilities $309,919 $314,966
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SHAREHOLDERS' EQUITY:
Preferred stock-Par Value $0.1; 1,000,000 share authorized;
none outstanding - -
Common stock-Par Value $.01; 5,000,000 shares
authorized;
1,693,052 and 1,128,779 shares issued and outstanding
for 1997 and 1996. 17 11
Paid-in capital 6,487 6,493
Retained earnings 15,193 14,332
Unrealized gain (loss) on securities available
for sale net of taxes (8) 22
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Total Shareholders' Equity $ 21,689 $ 20,858
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Total Liabilities and Shareholders' Equity $331,608 $335,824
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CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) HOMECORP, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA) AND SUBSIDIARY
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Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
INTEREST INCOME:
Loans receivable $5,342 $5,344 $10,672 $10,648
Mortgage-backed securities 269 320 549 650
Securities available for sale 200 164 408 298
Investment securities and other 196 238 411 443
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Total interest income 6,007 6,066 12,040 12,039
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INTEREST EXPENSE:
Deposits 3,586 3,647 7,220 7,354
Borrowed Funds 4 - 4 -
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Total interest expense 3,590 3,647 7,224 7,354
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Net interest income 2,417 2,419 4,816 4,685
Provision for loan losses 65 105 140 220
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Net interest income
after provision for loan losses 2,352 2,314 4,676 4,465
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NON-INTEREST INCOME:
Fees and service charges 465 419 936 816
Gain (loss) on sale of:
Loans receivable 83 211 164 549
Securities available for sale - - (9) -
Income from real estate developments 688 (14) 749 (14)
Operations of real estate owned 120 116 240 231
Other 54 51 121 84
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Total non-interest income 1,410 783 2,201 1,666
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NON-INTEREST EXPENSE:
Compensation and benefits 1,341 1,251 2,676 2,508
Office occupancy and equipment 322 305 647 619
Data processing 201 223 421 441
Federal deposit insurance premium 127 203 213 406
Other 512 443 1,019 895
Provision for loss on foreclosed
real estate 470 - 505 -
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Total non-interest expense 2,989 2,425 5,481 4,869
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Income before income taxes 773 672 1,396 1,262
Income taxes 297 261 535 495
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Net income $ 476 $ 411 $ 861 $ 767
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Earnings per common and
common equivalent share $ 0.26 $ 0.23 $ 0.48 $ 0.43
======= ======= ======= =======
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) HOMECORP, INC.
(IN THOUSANDS) AND SUBSIDIARY
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Six Months Ended
June 30,
1997 1996
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Cash flows from operating activities:
Net income $ 861 $ 766
Adjustment to reconcile net income to
net cash (used in) operating activities:
Amortization of:
Premiums and discounts on loans, and
mortgage-backed and investment securities 39 60
Net (income)/loss from real estate developments (749) 1
Provision for loan losses 140 115
Provision for loss on foreclosed real estate 505 -
Net (gain) loss on sale of:
Loans receivable (164) (338)
Securities available for sale 9 -
Depreciation and amortization of premises and equipment 223 118
Decrease (Increase) in loans held for sale (427) (557)
Increase (Decrease) in cash flows due to changes in:
Accrued interest and other assets 205
Deferred taxes and other liabilities 195 115
Total adjustments (24) (813)
Net cash provided by (used in) operating activities 837
Cash flows from investing activities:
Loan originations, net of principal payments on loans (3,271) 2,594
Purchases of:
Loan participations (2,604) (3,202)
Securities available for sale (4,500) (6,997)
Investment securities (2,000) (1,000)
Certificates of deposit - (7,000)
Premises and equipment (27) (112)
Investment in foreclosed real estate 7 (34)
Investment in real estate developments (130) (782)
Principal payments on mortgage-backed securities 1,584 3,485
Principal repayments of securities available for sale 427 685
Proceeds from sales of:
Securities available for sale 2,506 -
Foreclosed real estate 274 61
Proceeds from maturities of:
Certificates of deposit - 7,000
Investment securities 1,000 2,000
Securities available for sale 3,000 1,986
Redemption of investments required by law 442 172
Distributions of income on real estate partnerships 211 133
Net cash provided by investing activities (3,081) 923
Cash flows from financing activities:
Net increase (decrease) in borrowings 2,000 -
Net increase (decrease) in deposits (7,083) 517
Net increase (decrease) in advance payments by
borrowers for taxes and insurance (159) (566)
Net cash used in financing activities (5,242) (49)
Net increase (decrease) in cash and cash equivalents (7,486) 1,544
Cash and cash equivalents at beginning of year 14,140 10,412
Cash and cash equivalents at end of year 6,654 11,956
Supplemental disclosures of cash flow information
payment during the period for:
Interest 7,222 7,357
Taxes 256 240
HOMECORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) MANAGEMENT'S STATEMENT
In the opinion of management the accompanying unaudited financial statements
contain all adjustments (all of which are normal and recurring in nature)
necessary to present fairly the financial position of HomeCorp, Inc. and
Subsidiary (the Company) at June 30, 1997 and December 31, 1996 and the
results of operations and cash flows for the six month periods ended June
30, 1997 and 1996. The Notes to the Consolidated Financial Statements which
are contained in the 1996 Annual Report to Shareholders and incorporated by
reference into the 1996 Form 10-K should be read in conjunction with these
Consolidated Financial Statements.
(2) LOANS RECEIVABLE
Following is a summary of loans receivable for the dates indicated:
June 30, Dec.31,
(In Thousands) 1997 1996
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Conventional first mortgage loans $166,825 $168,848
Short-term construction and land loans 20,041 15,243
Commercial business loans 7,597 6,243
Auto and boat loans 55,172 53,325
Home equity and improvement loans 23,235 21,168
Other consumer loans 1,136 1,298
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Total loans receivable, gross $274,006 $266,125
Less:
Loans in process 8,107 5,639
Deferred loan origination costs (420) (446)
Unearned discount, principally on
loans purchased 187 210
Allowance for possible loan losses 1,580 1,582
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Total loans receivable net $264,552 $259,140
======== ========
Adjustable rate loans totaled $111.3 million and $100.9 million at June 30,
1997 and December 31, 1996, respectively. The Bank serviced first mortgage
loans for other institutions approximating $164.0 million and $162.9 million
at June 30, 1997 and December 31, 1996, respectively.
The following summarizes activity in the allowance for loan losses for
the three month periods indicated:
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
(In Thousands) 1997 1996 1997 1996
-------- -------- ------- --------
Balance at beginning of period $ 1,625 $ 1,271 $1,582 $ 1,175
Charge-offs (118) (12) (150) (33)
Recoveries 8 1 8 3
Provision for possible loan losses 65 105 140 220
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Balance at end of year $ 1,580 $ 1,365 $ 1,580 $ 1,365
======== ======== ======== =======
Total impaired loans at June 30, 1997 were $1.7 million.
In addition to residential and commercial mortgage loans and consumer loans
90 days or more delinquent, which totaled $269,000, the Bank identified two
participating interests totaling $1.4 million at June 30, 1997 that were
ninety days delinquent. The participating interests represent interests in
loans to a single borrower and are secured by multi-family properties
located in Southern Wisconsin. Payments were received during the first six
months of 1997 that maintained the loans at an approximate 90 day delinquent
status. The underlying borrower sold the properties on contract to an
individual that ultimately declared bankruptcy. The properties have been
cleared from the bankruptcy proceedings and the original borrower is
completing a plan to return the loans to current status.
A total of $58,000 in interest income was recognized during the first six
months of 1997 on impaired loans. A total of $48,000 was recognized on the
two delinquent participations discussed above. An additional $106,000 of
interest income would have been recognized had the nonaccruing impaired
loans remained current. The average recorded investment in impaired loans
during the six months ended June 30, 1997 was approximately $2.7 million.
The Bank has no restructured loans at June 30, 1997.
(3) EARNINGS PER SHARE
The Company's outstanding common shares have been adjusted for all periods
presented to reflect the impact of the three-for-two stock split declared by
the Board of Directors on April 22, 1997.
Earnings per share for the three and six months ended June 30, 1997 were
computed by dividing net income by 1,774,297, the average number of common
and common equivalent shares (using the treasury share method) outstanding,
respectively. The Company's equivalent shares consist
entirely of common stock options.
Earnings per share for the three and six months ended June 30, 1996 were
computed by dividing net income by 1,758,030 and 1,741,162, the weighted
average number of shares outstanding during the respective periods as
adjusted for the dilutive effect of common stock options.
(4) NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share", which is required to be adopted on December
31, 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact is
expected to result in an increase in primary earnings per share for the
three and six months ended June 30, 1997 and June 30, 1996 of $.02. The
impact is expected to result in an increase in primary earnings per share of
$.01 and $.03 for the three and six months ended June 30, 1996. The impact
of Statement 128 on the calculation of fully diluted earnings per share for
these quarters is not expected to be material.
HOMECORP, INC.
AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
FORWARD-LOOKING STATEMENTS
When used in this Form 10-Q and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases or other
public or shareholder communications, and in oral statements made with the
approval of an authorized executive officer, the words or phrases "will likely
result", "are expected to", "will continue", "is anticipated", "estimate",
"project" or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties, that
could cause actual results to differ materially from historical earnings and
those presently anticipated or projected. The Company wishes to caution readers
not to place undue reliance on any such forward-looking statements, which speak
only as of the date made. The Company wishes to advise readers that the factors
listed below could affect the Company's financial performance and could cause
the Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
The Company does not undertake -- and specifically declines any obligation -- to
publicly release the result of any revisions which may be made to any forward-
looking statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated events.
FINANCIAL CONDITION
The Company's June 30, 1997 balance sheet reflects the continuing focus upon
community banking. The consumer loan portfolio increased $3.7 million, or 5%
during the first six months of 1997 while the commercial business loan portfolio
increased $1.4 million, or 22%. Consumer growth was largely due to the
origination of indirect automobile loans. All such loans are underwritten and
approved by HomeBanc loan officers. Growth was also generated in home equity
and improvement loans, a result of targeted loan promotions during the first
half of 1997. The Bank intends to continue such promotions during the second
half of 1997. The Bank's involvement with the business community continues to
provide steady growth in the commercial loan portfolio. Relationships
established through business lending generally result in the Bank providing
additional services as well, such as checking and related services.
The mortgage loan portfolio remained relatively stable, increasing $291,000, or
less than 1% during the first six months of 1997. A $1.8 million participation
secured by a motel in southern Wisconsin was repaid during 1997. Included with
mortgage loans is the Bank's construction portfolio, which increased $2.3
million during the six months ended June 30, 1997. The Bank does not anticipate
similar growth in the construction loan portfolio during the second half of
1997. The Bank continues to sell all fixed interest rate one to-four family
mortgage loans originated as well as certain adjustable rate loans.
Investment in real estate developments increased $668,000 during the first six
months of 1997. The Company sold its interest in two real estate development
partnerships during 1997 at a small gain. The partnerships each contained a
single developed commercial lot. This decline was more than offset primarily by
increased undistributed earnings in the Company's final real estate partnership.
This partnership sold two commercial parcels in 1997 and generated income that
had not yet been distributed to the Company at June 30, 1997. The Company's
remaining project is located in suburban Chicago and contains both residential
and commercial lots. The completion of the final 90 residential lots was
initiated during the first quarter and management anticipates the lots being
available for sale during third quarter 1997.
Investment in foreclosed real estate decreased $265,000 to $9.4 million. A
provision of $470,000 was recorded during the second quarter of 1997 based upon
management's ongoing evaluation of the REO properties. See "Results of
Operations - Three Months Ended June 30, 1997 vs 1996."
Deposits of the Bank declined between June 30, 1997 and December 31, 1996
primarily due to run-off of 30 to 36 month certificates of deposit. The Bank
continues to focus upon the generation of what are considered core banking
relationships.
The Bank's suit in the United States Court of Federal Claims against the United
States for breach of contract wit regard to the utilization as capital of the
supervisory goodwill, which was created when the Bank acquired failing
institutions in the 1980's, has been stayed pending the outcome of an appeal in
another case that was heard by the U.S. Supreme Court. While the Supreme Court
ruled favorably on the issue in the other case, the Company's suit has yet to be
heard.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the yields on average
interest-earning assets as well as the cost of average interest-bearing
liabilities. The table does not reflect the impact of income taxes. All
averages are monthly average balances.
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
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Mortgage loans 8.12% 7.98% 8.19% 7.93%
Consumer loans 8.19 8.25 8.10 8.24
Commercial loans 9.43 9.01 9.26 9.32
Other earning assets 6.11 5.89 6.04 5.73
---- ---- ---- ----
Total interest-earning assets 7.88 7.72 7.87 7.67
---- ---- ---- ----
Deposits 4.82 4.75 4.82 4.81
Borrowings 5.46 0.00 5.46 0.00
---- ---- ---- ----
4.82 4.75 4.82 4.81
---- ---- ---- ----
Interest rate spread 3.06% 2.97% 3.05% 2.86%
==== ==== ==== ====
Net interest rate margin 3.17% 3.08% 3.15% 2.98%
==== ==== ==== ====
THREE MONTHS ENDED JUNE 30, 1997 VS 1996:
Net income increased 16% during the quarter ended June 30, 1997 compared to the
same quarter of 1996. The Company's more significant improvements were noted in
income from real estate development and loan fees and service charges. These
improvements were partially offset by a $470,000 provision for loss on REO
recorded during the second quarter of 1997. Net interest income was consistent
between the quarters at $2.4 million.
Net Interest Income
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The Company's net interest margin increased to 3.17% during the second quarter
of 1997 from 3.08% during second quarter 1996. The asset yield increased to
7.88% from 7.72% while the Company's cost of funds increased to 4.82% from
4.75%. The increased asset yield resulted from consumer loan portfolio growth
and increased yields in the mortgage and mortgage-backed securities portfolios.
Consumer originations continued to provide portfolio growth, while the equity
line of credit portfolio provided an asset capable of immediately responding to
changes in interest rates. The mortgage portfolio contains six month adjustable
ARMS and construction loans which are both responsive to interest rate changes.
The increased yield from the mortgage-backed securities portfolio was the result
of repricing adjustable rate securities and a general slowing of repayment
activity, which benefits the Bank's portfolio which has a net premium position.
No mortgage-backed securities were purchased during 1997.
The increase in cost of funds is primarily the result of repricing of savings
deposits and competition in the Bank's market area for certificates of deposit.
Management continues to position the Bank in a competitive pricing scenario, but
does not attempt to match or exceed every rate offered locally. The cost of
savings deposits (passbook savings and money market) was 2.58% for the second
quarter of 1997 versus 2.11% during the second quarter of 1996.
Non-Interest Income
- -------------------
Income from real estate development increased to $688,000 for the three months
ended June 30, 1997 from a minimal loss during 1996. The 1997 income is due
primarily to the sale of commercial lots from one development partnership in
which the company is a partner. The remaining development partnership contains
both single-family and commercial lots, although management does not anticipate
the same volume of commercial lots closings during the second half of 1997 as
was experienced in the first six months.
Loan fees and service charges increased $47,000, or 11% in the second quarter of
1997 as compared to second quarter 1996. The improvement was primarily due to
increased service charges which continue to grow due to the emphasis upon the
Bank's core deposit base. Core deposits, such as checking and savings accounts
tend to generate more fee income than time deposits.
Net gains from the sale of mortgage loans and mortgage-backed and investment
securities declined to $83,000 for the second quarter of 1997 from $211,000
during the second quarter of 1996. There were fewer loans originated and sold
during 1997. This was due in large part to a general slowing of real estate
sales in the Bank's primary market area. The Bank has recently initiated plans,
both through the addition of personnel and expansion of residential loan
products offered, to increase mortgage originations and sales.
Provisions for Loan and REO Losses
- ----------------------------------
A provision of $470,000 was recorded during the second quarter of 1997 for
possible future losses from the sale of foreclosed real estate. The provision
was based upon management's ongoing analysis of foreclosed properties, primarily
the two largest properties, a parcel of land in Michigan and a shopping center
in the Bank's market area. The majority of the provision related to the
shopping center.
A provision of $65,000 was recorded for loan losses during the three months
ended June 30, 1997 as compared to $105,000 during the three months ended June
30, 1996. The reduction is based upon management's regular analysis of the
adequacy of the loan loss allowance. This analysis considers current impaired
loans, overall delinquencies, loss histories and general economic information.
Non-Interest Expenses
- ---------------------
Operating expenses increased by approximately 4% during second quarter 1997 from
second quarter 1996. Deposit premiums paid to the federal Deposit Insurance
Corporation declined $76,000 during the second quarter of 1997 from the second
quarter of 1996 as a result of the recapitalization of the Savings Association
Insurance Fund. This reduction was offset by increases in compensation and
benefits, which increased $90,000 between second quarter 1997 and 1996 due to
general compensation increases and additional personnel in the lending area.
Other expense increased $84,000 primarily due to legal costs incurred in the
Bank's lawsuit involving the parcel of land in Michigan foreclosed upon by the
Bank. The Bank is pursuing recovery of certain costs involved with the property
from its prior owners.
SIX MONTHS ENDED JUNE 30, 1997 VS 1996:
Net income increased 12% during the six months ended June 30, 1997 compared to
the same period of 1996. The Company's more significant operating improvements
were noted in income from real estate development and loan fees and service
charges. These improvements were partially offset by a $505,000 provision for
loss on foreclosed real estate. Net interest income increased approximately 3%
between 1997 and 1996.
Net Interest Income
- -------------------
Net interest income totaled $4.8 million for the first six months of 1997, an
increase of 3% from $4.7 million in the prior year. The Company's net interest
margin increased to 3.15% from 2.98% during the same time period. The asset
yield increased to 7.87% from 7.67% while the Company's cost of funds remained
virtually unchanged, increasing to 4.82% from 4.81%. The increased asset yield
resulted from consumer loan portfolio growth and increased yields in the
mortgage and mortgage-backed securities portfolios.
The increased yield from the mortgage-backed securities portfolio was the result
of repricing adjustable rate securities and a general slowing of repayment
activity. No mortgage-backed securities were purchased during the first half of
1997 or 1996.
The increase in cost of funds is primarily the result of repricing of savings
deposits. The cost of such deposits increased to 2.34% in 1997 as compared to
2.09% in 1996. Management believes the Bank is positioned competitively from a
deposit rate standpoint.
Non-Interest Income
- -------------------
Income from real estate development increased to $749,000 for the fix months
ended June 30, 1997 from a minimal loss of 1996. The 1997 income is due
primarily to the sale of two commercial lots from one of the Company's
development partnerships and the sale of the Company's interest in two
development partnerships, each of which contained a single commercial lot.
Loan fees and service charges increased $120,000, or 15% during 1997 as compared
to 1996. The improvement was primarily doe to increased service charges related
primarily to the Bank's core deposit accounts.
Net gains from the sale of mortgage loans and mortgage-backed and investment
securities declined to $156,000 in the first half of 1997 as compared to
$549,000 during the first half of 1996. The reduction in gains was the result
of lower sales volume of residential mortgage loans.
Provisions for Loan and REO Losses
- ----------------------------------
A provision of $505,000 was recorded during the first six months of 1997 for
possible future losses related to foreclosed real estate. The majority of the
provision, $470,000 was recorded in the second quarter of 1997. The provision
relates to the two largest properties in foreclosed property.
A loan loss provision of $140,000 was recorded during the first six months of
1997. This compares to a provision of $220,000 recorded during the same period
of 1996. The reduction is the result of management's ongoing analysis of the
adequacy of the Bank's loan loss allowance.
Non-Interest Expenses
- ---------------------
Operating expenses remained relatively stable, increasing by $108,000 or 2% in
the first half of 199 compared to the first half of 1996. Deposit premiums paid
to the Federal Deposit Insurance Corporation declined $192,000 or 47% during the
first six months of 1997 from the first six months of 1996 as a result of the
recapitalization of the Savings Insurance Fund in late 1996. This reduction was
offset by increases in compensation and benefits, which increased $167,000
between the first half of 1997 and 1996 due to
general compensation increases and additional personnel in the lending area.
Other expense increased $125,000 primarily due to legal costs incurred in the
Bank's lawsuit involving the parcel of foreclosed real estate in Michigan.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is generally regarded as the ability to generate sufficient cash flow
to meet all present and future funding commitments. The Bank's primary sources
of funds, or liquidity, are deposits, amortization and prepayment of loan
principal (including mortgage-backed and certain investment securities)
operations and to a lesser extent, maturities of investment securities and the
sale of available for sale securities.
The Bank's liquidity, represented by cash and cash equivalents, is a product of
its operating activities, investing activities, and financing activities.
Operating activities consist of net income adjusted for non-cash activity, and
generated or provided $867,000 in cash during first six months of 1997. This
compares to cash of $670,000 provided during first six months of 1996. The
primary differences between periods are increased net income and a decrease of
$205,000 in accrued interest and other assets during 1997 compared to an
increase of $428,000 during 1996.
Investing activities used $3.1 million in cash during 1997 and provided $923,000
in 1996. Loan originations for the portfolio net of principal repayments used
$3.3 million during the first six months of 1997. Repayments exceeded
originations by $4.5 million during the first six months of 1996. While loan
originations have not increased significantly between 1997 and 1996, the volume
of repayments, particularly of mortgage loans, was lower in 1997 than in 1996.
Also, the Bank has increased its origination of loan products for portfolio,
both mortgage and non-mortgage. Management continues to focus upon loan
portfolio growth.
A total of $2.5 million in available for sale securities were sold during 1997.
There were no such sales during 1996. The 1997 sales consisted primarily of a
$2.0 million U. S. Treasury that was within 30 days of maturity. The average
outstanding balance of the available for sale portfolio increased approximately
$3.0 million for the six months ended June 30, 1997 as compared to the six
months period ended June 30, 1996.
Financing activities used $5.2 million in case during 1997, primarily due to a
$7.1 million decline in deposits. Financing activities for the first six months
of 1996 financing used $49,000 in cash. As noted earlier, the decline in
deposits experienced during 1997 was primarily the result of a decline in
intermediate termed (30 to 36 month) certificates of deposit. The focus of the
Bank remains the generation of core deposits. Management believes the
certificate of deposit pricing of the Bank is reasonable and competitive. The
Bank did not attempt to match the higher rates offered on intermediate and a
longer term certificates of deposits available in the marketplace and did
experience a decline in these certificate of deposit classes. Deposit pricing
is reviewed continually in light of market movements and the Bank's demand for
funding sources.
The Bank had $2.0 million in borrowings at June 30, 1997. There were no
borrowings at June 30, 1996. Management utilizes short term borrowings, such as
the Federal Home Loan Bank open advance line, for short term financing needs.
HOMECORP, INC.
AND SUBSIDIARY
PART II. OTHER INFORMATION
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ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders (the "Meeting") of HomeCorp, Inc.
was held on April 22, 1997. The matters approved by stockholders at
the Meeting and the number of votes cast for, against, or withheld
(as well as the number of abstentious and broker non-votes) as to each
matter are set forth as follows:
PROPOSAL NUMBER OF VOTES
- -------- ---------------
BROKER
FOR WITHHELD NON-VOTES
------- -------- ---------
Election of the following
Directors for a 3-year term:
Karl H. Erickson 956,076 839 -
Robert C. Hauser 955,412 1,503 -
Larry U. Larson 956,076 839 -
Directors continuing in their terms:
Richard W. Malmgren
David R. Rydell
C. Steven Sjogren
Adam A. Jahns
Wesley E. Lindberg
John R. Perkins
BROKER
FOR AGAINST ABSTAIN NON-VOTES
Ratification of the ------- ------- ------- ---------
Appointment of
Ernst & Young LLP
as auditors for
the fiscal year
ending 12/31/96 949,670 930 6,315 -
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Index to Exhibits
(11) Statement regarding computation of earnings per share (included
in Note 3)
(27) Financial Data Schedule (attached)
(b) Reports on Form 8-K
HomeCorp filed the following form 8-K during the quarter ended June
30, 1997.
May 6, 1997 - The registrant issued a release on May 6, 1997
announcing the results of operations for the first quarter of 1997.
HOMECORP, INC.
AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements 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.
HOMECORP, INC.
--------------
(Registrant)
Date: August 14, 1997 /s/ C. Steven Sjogren
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C. Steven Sjogren
President
Chief Executive Officer
Date: August 14, 1997 /s/ John R. Perkins
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John R. Perkins
Executive Vice President
Chief Financial Officer
Date: August 14, 1997 /s/ Dirk J. Meminger
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Dirk J. Meminger
Treasurer
Chief Accounting Officer