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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000.
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-26570
Harrodsburg First Financial Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 61-1284899
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
104 South Chiles Street, Harrodsburg, Kentucky 40330-1620
- ---------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (859) 734-5452
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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 filing
requirements for the past ninety days. Yes X No
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As of May 10, 2000, 1,625,875 shares of the registrant's common stock were
issued and outstanding.
Page 1 of 17 Pages Exhibit Index at Page N/A
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C O N T E N T S
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 (unaudited) and
September 30, 1999................................................3
Consolidated Statements of Income for the Three-Month Periods Ended
March 31, 2000 and 1999 (unaudited) and the Six-Month Periods
Ended March 31, 2000 and 1999 (unaudited).........................4
Consolidated Statements of Changes in Stockholders' Equity for the
Six Month Periods Ended March 31, 2000 and 1999 (unaudited).......5
Consolidated Statements of Cash Flows for the Six Month Periods
Ended March 31, 2000 and March 31, 1999 (unaudited)...............6
Notes to Consolidated Financial Statements............................8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................15
Item 2. Changes in Securities................................................15
Item 3. Defaults Upon Senior Securities......................................15
Item 4. Submission of Matters to a Vote of Security Holders..................15
Item 5. Other Information....................................................15
Item 6. Exhibits and Reports on Form 8-K.....................................15
SIGNATURES
2
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
---------------------------
As of As of
March 31, September 30,
2000 1999
------------------ ------------------
(unaudited)
ASSETS
Cash and due from banks $ 437,749 $ 541,527
Interest Bearing Deposits 4,626,612 7,808,786
Available-for-sale securities 3,329,238 4,008,576
Held-to-maturity securities 6,773,812 7,231,745
Loans receivable, net 96,177,423 89,061,610
Accrued interest receivable 604,914 618,854
Premises and equipment, net 1,610,113 1,055,196
Other assets 72,021 89,837
------------------ ------------------
Total assets $ 113,631,882 $ 110,416,131
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 86,713,560 $ 82,018,317
Advance payments by borrowers for taxes and insurance 47,007 80,865
Deferred federal income tax 1,164,900 1,395,875
Dividends payable 458,923 468,701
Other liabilities 251,474 232,139
------------------ ------------------
Total liabilities 88,635,864 84,195,897
------------------ ------------------
Stockholders' equity
Common stock, $0.10 per value, 5,000,000 shares authorized;
2,182,125 shares issued and outstanding 218,213 218,213
Additional paid-in capital 21,207,265 21,194,168
Retained earnings, substantially restricted 10,942,680 11,187,966
Accumulated other comprehensive income 2,147,479 2,595,842
Treasury stock, 528,350 and 481,250 shares as of March 31,
2000 and September 30, 1999, respectively (8,300,209) (7,698,625)
Unallocated employee stock ownership plan (ESOP) shares (1,219,410) (1,277,330)
------------------ ------------------
Total stockholders' equity 24,996,018 26,220,234
------------------ ------------------
Total liabilities and stockholders' equity $ 113,631,882 $ 110,416,131
================== ==================
See accompanying notes to consolidated financial statements.
3
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
---------------------------
For the Three-Month Periods For the Six-Month Periods
Ended March 31 Ended March 31,
------------------------------- ------------------------------
2000 1999 2000 1999
-------------- ------------- ------------- -------------
Interest income:
Interest on loans $ 1,819,163 $ 1,671,740 $ 3,545,422 $ 3,357,289
Interest and dividends on securities 124,654 139,450 245,605 310,364
Other interest income 54,621 108,292 128,354 198,811
-------------- ------------- ------------- -------------
Total interest income 1,998,438 1,919,482 3,919,381 3,866,464
-------------- ------------- ------------- -------------
Interest expense:
Interest on deposits 991,959 939,414 1,945,291 1,907,977
-------------- ------------- ------------- -------------
Net interest income 1,006,479 980,068 1,974,090 1,958,487
Provision for loan losses 15,000 15,000 10,000
-------------- ------------- ------------- -------------
Net interest income after provision
for loan losses 991,479 980,068 1,959,090 1,948,487
-------------- ------------- ------------- -------------
Non-interest income:
Loan and other service fees, net 20,485 24,876 42,736 47,291
Other 4,211 3,381 8,008 6,747
-------------- ------------- ------------- -------------
Total non-interest income 24,696 28,257 50,744 54,038
-------------- ------------- ------------- -------------
Non-interest expense:
Compensation and benefits 307,112 238,256 583,219 465,646
Occupancy expenses, net 47,670 34,199 86,031 67,511
Federal and other insurance premiums 4,408 12,289 16,870 23,960
Data processing expenses 45,154 32,116 81,434 62,805
State franchise tax 24,219 23,814 59,473 47,633
Other operating expenses 138,229 103,641 263,050 207,029
-------------- ------------- ------------- -------------
Total non-interest expense 566,792 444,315 1,090,077 874,584
-------------- ------------- ------------- -------------
Income before income tax expense 449,383 564,010 919,757 1,127,941
Income tax expense 152,756 191,764 312,683 383,500
-------------- ------------- ------------- -------------
Net income $ 296,627 $ 372,246 $ 607,074 $ 744,441
============== ============= ============= =============
Earnings per common share $ 0.19 $ 0.23 $ 0.39 $ 0.44
============== ============= ============= =============
Earnings per common share
assuming dilution $ 0.19 $ 0.23 $ 0.39 $ 0.44
============== ============= ============= =============
Weighted average common shares
outstanding 1,537,144 1,632,106 1,551,942 1,683,690
============== ============= ============= =============
Weighted average common shares
outstanding after dilutive effect 1,537,144 1,632,106 1,551,942 1,683,690
============== ============= ============= =============
See accompanying notes to consolidated financial statements.
4
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
for the six month periods ended March 31, 2000 and 1999
(unaudited)
---------------------------
Accumulated
Additional Other
Common Paid-in Retained Comprehensive
Stock Capital Earnings Income
-------------- --------------- ---------------- ---------------
Balance, September 30, 1998 $ 218,213 $ 21,154,129 $ 11,003,179 $ 2,475,007
Comprehensive income:
Net income 744,441
Other comprehensive income, net of tax
unrealized gains on securities 391,125
Total comprehensive income
Dividend declared (854,675)
ESOP shares earned 24,213
Purchase of common stock, 186,076 shares
-------------- --------------- ---------------- ---------------
Balance, March 31, 1999 $ 218,213 $ 21,178,342 $ 10,892,945 $ 2,866,132
============== =============== ================ ===============
Balance, September 30, 1999 $ 218,213 $ 21,194,168 $ 11,187,966 $ 2,595,842
Comprehensive income:
Net income 607,074
Other comprehensive loss, net of tax
unrealized loss on securities (448,363)
Total comprehensive income
Dividend declared (852,360)
ESOP shares earned 13,097
Purchase of common stock, 47,100 shares
-------------- --------------- ---------------- ---------------
Balance, March 31, 2000 $ 218,213 $ 21,207,265 $ 10,942,680 $ 2,147,479
============== =============== ================ ===============
Unearned Total
Treasury ESOP Stockholders'
Stock Shares Equity
--------------- ---------------- ----------------
Balance, September 30, 1998 $ (4,477,515) $ (1,391,400) $ 28,981,613
----------------
Comprehensive income:
Net income 744,441
Other comprehensive income, net of tax
unrealized gains on securities 391,125
----------------
Total comprehensive income 1,135,566
Dividend declared (854,675)
ESOP shares earned 57,040 81,253
Purchase of common stock, 186,076 shares (2,748,002) (2,748,002)
--------------- ---------------- ----------------
Balance, March 31, 1999 $ (7,225,517) $ (1,334,360) $ 26,595,755
=============== ================ ================
Balance, September 30, 1999 $ (7,698,625) $ (1,277,330) $ 26,220,234
----------------
Comprehensive income:
Net income 607,074
Other comprehensive loss, net of tax
unrealized loss on securities (448,363)
----------------
Total comprehensive income 158,711
Dividend declared (852,360)
ESOP shares earned 57,920 71,017
Purchase of common stock, 47,100 shares (601,584) (601,584)
--------------- ---------------- ----------------
Balance, March 31, 2000 $ (8,300,209) $ (1,219,410) $ 24,996,018
=============== ================ ================
See accompanying notes to consolidated financial statements.
5
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
---------------------------
For the Six-Month Periods
Ended March 31,
--------------------------------------------------
2000 1999
-------------- --------------
Operating activities
Net income $ 607,074 $ 744,441
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 15,000 10,000
ESOP benefit expense 71,017 81,253
Provision for depreciation 44,443 28,465
Amortization of loan fees (38,808) (38,627)
Accretion/amortization of investment
premium/discount (64) (2,212)
FHLB stock dividend (52,100) (48,500)
Change in:
Interest receivable 13,940 46,605
Interest payable 3,939 1,539
Accrued liabilities 15,396 172,754
Prepaid expense 17,816 25,185
-------------- -------------
Net cash provided by operating activities 697,653 1,020,903
-------------- -------------
Investing activities
Net (increase) decrease in loans (7,092,005) (983,078)
Maturity of securities held-to-maturity 500,000 4,000,000
Principal repayments - mortgage back securities 10,097 8,856
Purchase of fixed assets (599,361) (11,388)
-------------- -------------
Net cash provided (used) by investing activities (7,181,269) 3,014,390
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See accompanying notes to consolidated financial statements.
6
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
---------------------------
For the Six-Month Periods
Ended March 31,
--------------------------------------------------
2000 1999
-------------- --------------
Financing activities
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts 60,088 1,660,721
Net increase (decrease) in certificates of deposit 4,635,155 1,405,184
Net increase (decrease) in custodial accounts (33,858) (30,444)
Purchase of treasury stock (601,584) (2,748,002)
Payment of dividends (862,137) (889,604)
--------------- ---------------
Net cash provided (used) by financing activities 3,197,664 (602,145)
--------------- ---------------
Increase (decrease) in cash and cash equivalents (3,285,952) 3,433,148
Cash and cash equivalents, beginning of period 8,350,313 8,074,105
--------------- ---------------
Cash and cash equivalents, end of period $ 5,064,361 $ 11,507,253
=============== ===============
Supplemental Disclosures
Cash payments for:
Interest on deposits $ 1,941,352 $ 1,906,438
=============== =============
Income taxes $ 315,000 $ 225,000
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See accompanying notes to consolidated financial statements.
7
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Harrodsburg First Financial Bancorp (the "Company") was formed at the
direction of First Federal Savings Bank of Harrodsburg (the "Bank") to
become the holding company of the Bank upon the conversion of the Bank
from mutual to stock form (the "Conversion"). Effective January 1, 2000,
the Bank's name was changed to First Financial Bank. The Company's sole
business is to serve as a holding company for the Bank. Accordingly, the
financial statements and discussions herein include both the Company and
the Bank. The Company was incorporated at the direction of the Board of
Directors of the Bank in June 1995. On September 29, 1995, the Bank
converted from mutual to stock form as a wholly owned subsidiary of the
Company. In conjunction with the Conversion, the Company issued 2,182,125
shares of its common stock to the public.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) necessary for fair
presentation have been included. The results of operations and other data
for the three and six month periods ended March 31, 2000 are not
necessarily indicative of results that may be expected for the entire
fiscal year ending September 30, 2000.
2. Dividends
On March 20, 2000, the Board of Directors of the Company authorized the
payment of a cash dividend of $.30 per share to all shareholders of record
on March 31, 2000 payable on April 14, 2000. The total dividends paid by
the Company for the six months ended March 31, 2000 amounted to $862,137.
3. Treasury stock
The Company repurchased a total of 28,400 shares at a total price of
$355,400 during the three months ended March 31, 2000. During the six
months ended March 31, 2000, a total of 47,100 shares had been repurchased
at a total price of $601,584.
8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
The Company's consolidated assets increased approximately $3.2 million, or 2.9%
to $113.6 million at March 31, 2000 compared to $110.4 million at September 30,
1999. The net increase of $3.2 million was due primarily to a $7.1 million
increase in net loans receivable and a $550,000 increase in net premises and
equipment, offset in part by a decrease of $1.1 million in investment securities
and a decrease of $3.3 million in cash and interest-bearing deposits.
The Company's investment portfolio decreased approximately $1.1 million.
Securities classified as available- for-sale and recorded at market value per
SFAS No. 115 decreased $680,000 due solely to the decrease in market value of
such securities. Securities held-to-maturity decreased $460,000 primarily due to
the call of one $500,000 FHLB bond.
Under SFAS No. 115, unrealized gains or losses on securities available-for-sale
are recorded net of deferred income tax as a separate component of retained
earnings. At March 31, 2000, the Company included net unrealized gains of
approximately $2,147,000 in retained earnings. At September 30, 1999, the
Company included net unrealized gains of approximately $2,596,000 in retained
earnings. Per SFAS No. 115, such gains or losses will not be reflected as a
charge or credit to earnings until the underlying gains or loss, if any, is
actually realized at the time of sale.
Loans receivable increased by $7.1 million, or 8.0%, from $89.1 million at
September 30, 1999 to $96.2 million at March 31, 2000 as management continued
its efforts to be competitive in meeting the loan demand in the Bank's market
area.
Deposits increased $4.7 million, or 5.7% from $82.0 million at September 30,
1999 to $86.7 million at March 31, 2000. This increase reflects the Company's
competitively priced product line within the local market area.
Stockholders' equity decreased by $1.2 million to $25.0 million for the
six-month period ended March 31, 2000. The net decrease of $1.2 million is due
to decreases of $602,000 from the purchase of the Company's stock, the
declaration of dividends totaling $852,000, and a decrease of $448,000 in net
unrealized appreciation on investments held-for-sale, offset by net income for
the six-month period of $607,000 plus an increase of $71,000 related to the
release of ESOP shares from collateral during the six month period ended March
31, 2000.
Results of Operations for the Three Months Ended March 31, 2000 and 1999
Net Income
Net income decreased by $76,000, or 20.3%, for the three month period ended
March 31, 2000 as compared to the same period in 1999. The net decrease of
$76,000 was due to an increase of $122,000 in non-interest expense, an increase
of $15,000 in the provision for loan losses, and a $4,000 decrease in
non-interest income offset by a $26,000 increase in net interest income and a
$39,000 decrease in income tax expense for 2000 compared to 1999.
9
Net Interest
Net interest income for the three months ended March 31, 2000 was $1.0 million
compared to $980,000 for the same period in 1999. The increase in net interest
income in 2000 of $26,000 was due to an increase in interest income of $79,000
offset by an increase in interest expense of $53,000.
Interest Income
Interest income was $2.0 million, or 7.3% of average interest-earning assets,
for the quarter ended March 31, 2000 as compared to $1.9 million, or 7.1% of
average interest-earning assets, for the quarter ended March 31, 1999. Interest
income increased $79,000 or 4.1% from 1999 to 2000. The change was due to an
increase of $560,000 in the average balance of interest-earning assets during
the quarter ended March 31, 2000 compared to the quarter ended March 31, 1999,
and a 25 basis point increase in the average rate earned on interest-earning
assets.
Interest Expense
Interest expense was $992,000, or 4.7% of average interest-bearing deposits, for
the quarter ended March 31, 2000 as compared to $939,000, or 4.6% of average
interest-bearing deposits, for the corresponding period in 1999. Interest
expense increased by $53,000 due primarily to an increase of $3.5 million in the
average balance of interest bearing liabilities during the quarter ended March
31, 2000 compared to the quarter ended March 31, 1999.
Provision for Loan Losses
There was a $15,000 provision for loan losses during the quarter ended March 31,
2000, as compared to no provision for the corresponding period in 1999.
Management considered many factors in determining the necessary levels of the
allowance for loan losses, including an analysis of specific loans in the
portfolio, estimated value of the underlying collateral, assessment of general
trends in the real estate market, delinquency trends, prospective economic and
regulatory conditions, inherent loss in the loan portfolio, and the relationship
of the allowance for loan losses to outstanding loans. At March 31, 2000 and
1999, the allowance for loan losses represented .40% of total loans. The
allowance for loan losses was at a level consistent with management's analysis
of the loan portfolio.
Non Interest Income
Non-interest income amounted to $24,000 and $28,000 for the quarters ended March
31, 2000 and 1999, respectively. The largest item in non interest income is
service fees on loan and deposit accounts, which amounted to $20,000 and $25,000
for 2000 and 1999, respectively.
Non Interest Expense
Non-interest expense increased approximately $122,000, or 27.6% to $566,000 for
the quarter ended March 31, 2000 compared to $444,000 for the comparable period
in 1999. Non-interest expense was 2.0% and 1.6% of average assets for the
three-month period ended March 31, 2000 and 1999, respectively. The increase of
$122,000 was due primarily to increases of $69,000 in compensation and benefits,
$13,000 in occupancy expenses, $13,000 in data processing expenses, and $34,000
in other operating expenses offset by a decrease of $7,000 in federal and other
insurance premiums. The increase of $69,000 in compensation and benefits is
primarily due to the addition of a new Chief Executive Officer effective October
1, 1999, four additional
10
employees hired for the new branch office in Lawrenceburg, Kentucky, which
opened February 14, 2000, and normal salary increases. The increase of $13,000
in occupancy expenses and $13,000 in data processing and the increase of $34,000
in other operating expenses were all related to the operations of a new branch
office in the quarter ended March 31, 2000, which is located in Lawrenceburg,
Kentucky.
Income Taxes
The provision for income tax expense amounted to approximately $153,000 and
$192,000 for the quarters ended March 31, 2000 and 1999, respectively, which as
a percentage of income before income tax expenses amounted to 34.0% for both
periods.
Results of Operations for the Six Months Ended March 31, 2000 and 1999
Net Income
Net income decreased by $137,000 or 18.5% for the six month period ended March
31, 2000 as compared to the same period in 1999. The net decrease of $137,000
was due to an increase of $215,000 in non-interest expense, an increase of
$5,000 in the provision for loan losses, and a $3,000 decrease in non-interest
income offset by a $15,000 increase in net interest income, and a $71,000
decrease in income tax expense.
Interest Income
Interest income was $3.9 million, or 7.2% of average interest-earning assets for
the six month period ended March 31, 2000 compared to $3.9 million, or 7.1% of
average-earning assets for the six month period ended March 31, 1999. Interest
income increased by $52,000 or 1.4% from 1999 to 2000. The increase in interest
income was due to an increase of 8 basis points in the average rate earned plus
a $340,000 increase in the average balance of interest-earning assets during the
six month period ended March 31, 2000 compared to the six month period ended
March 31, 1999.
Interest Expense
Interest expense was 1.9 million, or 4.7% of average interest-bearing deposits,
for the six month period ended March 31, 2000 as compared to $1.9 million, or
4.8% of average interest-bearing deposits, for the corresponding period in 1999.
Interest expense increased by $37,000 or 2.0% from 1999 to 2000. The increase in
interest expense was due primarily to a $3.4 million increase in the average
balance of interest bearing liabilities for the period ended March 31, 2000
compared to the corresponding period in 1999, offset by a 10 basis point
decrease in the average rate paid on the deposits.
Provision for Loan Losses
The provision for loan losses during the six month period ended March 31, 2000
amounted to $15,000 as compared to $10,000 for the corresponding period in 1999.
Management considers many factors in determining the necessary level of the
allowance for loan losses, including an analysis of specific loans in the
portfolio, estimated value of the underlying collateral, assessment of general
trends in the real estate market, delinquency trends, prospective economic and
regulatory conditions, inherent loss in the loan portfolio, and the relationship
of the allowance for loan losses to outstanding loans.
11
Non-Interest Income
Non-interest income amounted to $51,000 and $54,000 for the six month periods
ended March 31, 2000 and 1999, respectively. The largest item in non-interest
income is service fees on loan and deposit accounts, which amounted to $43,000
and $47,000 for the six month period ended March 31, 2000 and 1999,
respectively.
Non-Interest Expense
Non-interest expense increased $215,000 or 24.6% to $1.1 million for the six
month period ended March 31, 2000 compared to $875,000 for the comparable period
in 1999. Non-interest expense was 1.9% and 1.6% of average assets for the
six-month periods ended March 31, 2000 and 1999, respectively. The increase of
$215,000 was due primarily to an increase of $117,000 in compensation and
benefits, $19,000 in occupancy expenses, $19,000 in data processing expenses,
$56,000 in other operating expenses, and $11,000 in state franchise tax offset
by a $7,000 decrease in federal and other insurance premiums. The increase of
$117,000 in compensation and benefits is primarily due to the addition of a new
Chief Executive Officer effective October 1, 1999, four additional employees
hired for the new branch office in Lawrenceburg, Kentucky and normal salary
increases. The increase of $19,000 in occupancy expenses, $19,000 in data
processing expenses, and $56,000 in other operating expenses was due to the
operations of the new branch office, which began operations effective February
14, 2000.
Income Taxes
The provision for income tax expense amounted to approximately $313,000 and
$384,000 for the six month periods ended March 31, 2000 and 1999, respectively,
which as a percentage of income before income tax expense amounted to a 34.0%
for both periods.
Year 2000
Like many financial institutions, the Bank relies on computers to conduct its
business and information systems processing. Industry experts were concerned
that on January 1, 2000, some computers might not be able to interpret the new
year properly, causing computer malfunctions. Some banking industry experts
remain concerned that some computers may not be able to interpret additional
data in the year 2000 properly. The Bank has operated and evaluated its computer
operating systems following January 1, 2000 and has not identified any errors or
experienced any computer system malfunctions. The Bank will continue to monitor
information systems to assess whether its systems are at risk of misinterpreting
any future dates and will develop appropriate contingency plans to prevent any
potential system malfunction or correct any system failures. The Bank has not
been informed of any such problem experienced by its vendors or its customers,
nor by any of the municipal agencies that provide services to the Bank.
Nevertheless, it is too soon to conclude that there will not be any problems
arising from the Year 2000 problem, particularly at some of the Bank's vendors.
The Bank will continue to monitor its significant vendors of goods and services
with respect to Year 2000 problems they may encounter as those issues may effect
the Bank's ability to continue operations, or might adversely affect the Bank's
financial position, results of operations, and cash flows. The Bank does not
believe at this time that these potential problems will materially impact the
ability of the Company to continue its operations; however, no assurance can be
given that this will be the case.
12
The expectations of the Bank contained in this section on Year 2000 are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and involve substantial risks and uncertainties
that may cause results to differ materially from those indicated by the forward
looking statements. All forward looking statements in this section are based on
information available to the Bank on the date of this document, and the Bank
assumes no obligation to update such forward looking statements.
Non-Performing Assets
The following table sets forth information with respect to the Bank's
non-performing assets at the dates indicated. No loans were recorded as
restructured loans within the meaning of SFAS No. 15 at the dates indicated.
March 31, September 30,
2000 1999
--------------- -----------------
(amounts in thousands)
Loans accounted for on a non-accrual basis:/1 Real Estate:
Residential............................................... $ - $ -
-------------- --------------
Total .................................................... - -
--------------- ---------------
Accruing loans which are contractually past due 90 days or more:
Real Estate:
Residential............................................... 338 214
Other .................................................... 18 23
Consumer.................................................. 41 44
--------------- ---------------
Total .................................................... 397 281
--------------- ---------------
Total of non-accrual and 90 day past due loans.................. $ 397 $ 281
=============== ===============
Percentage of net loans......................................... .41% .32%
=============== ===============
Other non-performing assets/2.................................... $ - $ -
=============== ===============
At March 31, 2000, the Bank did not have any loans in non-accrual status.
Accordingly, all income earned for the six months ended March 31, 2000 on the
loans in the table above, has been included in income.
At March 31, 2000, there were no loans identified by management, which were not
reflected in the preceding table, but as to which known information about
possible credit problems of borrowers caused management to have serious doubts
as to the ability of the borrowers to comply with present loan repayment terms.
- --------
1/ Non-accrual status denotes any loan past due 90 days and whose loan balance,
plus accrued interest exceeds 90% of the estimated loan collateral value.
Payments received on a non-accrual loan are either applied to the
outstanding principal balance or recorded as interest income, or both,
depending on assessment of the collectibility of the loan.
2/ Other non-performing assets represent property acquired by the Bank through
foreclosure or repossessions accounted for as a foreclosure in- substance.
This property is carried at the fair market of the property value, net of
selling expenses.
13
The Bank's actual capital and its statutory required capital levels based on the
consolidated financial statements accompanying these notes are as follows (in
thousands):
March 31, 2000
--------------------------------------------------------------------------------------
To be Well
Capitalized Under
For Capital Prompt Corrective
Adequacy Purposes Action Provisions
------------------------- ------------------------- -------------------------
Actual Required Required
------------------------- ------------------------- -------------------------
Amount % Amount % Amount %
------------ ------------ ------------ ------------ -------------------------
Core capital $ 21,238 19.2% $ 4,415 4.0% $ 6,623 6.0%
Tangible capital $ 21,238 19.2% $ 1,656 1.5% N/A N/A
Total Risk based capital $ 21,609 21.2% $ 8,159 8.0% $ 10,198 10.0%
Leverage $ 21,238 19.2% N/A N/A $ 5,519 5.0%
September 30, 1999
--------------------------------------------------------------------------------------
To be Well
Capitalized Under
For Capital Prompt Corrective
Adequacy Purposes Action Provisions
------------------------- ------------------------- -------------------------
Actual Required Required
------------------------- ------------------------- -------------------------
Amount % Amount % Amount %
------------ ------------ ------------ ------------ -------------------------
Core capital $ 22,556 21.2% $ 4,260 4.0% $ 6,390 6.0%
Tangible capital $ 22,556 21.2% $ 1,598 1.5% N/A N/A
Total Risk based capital $ 22,906 36.9% $ 4,961 8.0% $ 6,201 10.0%
Leverage $ 22,556 21.2% N/A N/A $ 5,325 5.0%
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
required each federal banking agency to implement prompt corrective actions for
institutions that it regulates. In response to this requirement, OTS adopted
final rules based upon FDICIA's five capital tiers. The rules provide that a
savings bank is "well capitalized" if its total risk-based capital ratio is 10%
or greater, its Tier 1 risk-based capital ratio is 6% or greater, its leverage
capital ratio is 5% or greater and the institution is not subject to a capital
directive. Under this regulation, the Bank was deemed to be "well capitalized"
as of March 31, 2000 and September 30, 1999. There are no conditions or events
since those notifications that management believes would change its
classifications.
Liquidity
The liquidity of the Company depends primarily on the dividends paid to it as
the sole shareholder of the Bank. At March 31, 2000, the Bank could pay common
stock dividends of approximately $12.1 million.
The Bank's primary sources of funds are deposits and proceeds from principal and
interest payments of loans. Additional sources of liquidity are advances from
the FHLB of Cincinnati and other borrowings. At March 31, 2000, the Bank had no
outstanding borrowings. The Bank has utilized and may in the future, utilize
FHLB of Cincinnati borrowings during periods when management of the Bank
believes that such borrowings provide a lower cost source of funds than deposit
accounts and the Bank desires liquidity in order to help expand its lending
operations.
14
The Company's operating activities produced positive cash flows for the
six-month periods ended March 31, 2000 and 1999.
The Bank's most liquid assets are cash and cash-equivalents, which include
investments in highly liquid, short-term investments. At March 31, 2000 and
September 30, 1999, cash and cash equivalents totaled $5.1 million and $8.4
million, respectively.
At March 31, 2000, the Bank had $49.9 million in certificates of deposits due
within one year and $15.2 million due between one and three years. Management
believes, based on past experience, that the Bank will retain much of the
deposits or replace them with new deposits. At March 31, 2000, the Bank had $2.5
million in outstanding commitments to originate mortgages, excluding $1.5
million in approved but unused home equity lines of credit and $820,000 in
approved but unused lines of credit and letters of credit. The Bank intends to
fund these commitments with short-term investments and proceeds from loan
repayments.
OTS regulations require that the Bank maintain specified levels of liquidity.
Liquidity is measured as a ratio of cash and certain investments to withdrawable
savings. The minimum level of liquidity required by regulation is presently
4.0%. During the second quarter of fiscal year 2000, the Bank satisfied all
regulatory liquidity requirements, and management believes that the liquidity
levels maintained are adequate to meet potential deposit outflows, loan demand,
and normal operations.
Impact of Inflation and Changing Prices
The consolidated financial statements and notes thereto presented herein have
been prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time and due to inflation. The impact of inflation is
reflected in the increased cost of the Company's operations. Unlike most
industrial companies, nearly all the assets and liabilities of the Company are
monetary in nature. As a result, interest rates have a greater impact on the
Company's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the price of goods and services.
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................None
Item 2. Changes in Securities.............................................None
Item 3. Defaults Upon Senior Securities...................................None
Item 4. Submission of Matters to a Vote of Security Holders...............None
The Company's Annual Meeting of Stockholders was held on January 24,
2000. 1,377,942 shares of Harrodsburg First Financial Bancorp, Inc.
common stock were represented at the Annual Meeting in person or by
proxy.
Stockholders voted in favor of the election of three nominees for
director. The voting results for each nominee were as follows:
Votes in Votes
Nominee Favor of Election Withheld
------------------------ --------------------- ----------------
Arthur Freeman 1,372,833 5,109
Jack D. Hood 1,332,894 45,048
W. Dudley Shryock 1,373,886 4,056
Shareholders voted in favor of the appointment of Miller, Mayer,
Sullivan, & Stevens, LLP as auditors for the Company for the fiscal
year ending September 30, 2000. Votes were cast as follows: 1,359,917
votes in favor, 10,975 votes against, and 7,050 votes abstaining.
Item 5. Other Information.................................................None
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31,
2000.
Exhibit 27.....................................Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Harrodsburg First Financial Bancorp, Inc.
/s/ Jack Hood
Date: May 10, 2000 ---------------------------------------------
Jack Hood, President
/s/ Teresa W. Noel
Date: May 10, 2000 ---------------------------------------------
Teresa W. Noel, Treasurer
17