SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
(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, 1997.
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.
--------------------------------------------------------------
(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: (606) 734-5452
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 / /
As of May 9, 1997, 2,024,756 shares of the registrant's common stock were issued
and outstanding.
Page 1 of 16 Pages Exhibit Index at Page N/A
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997 (unaudited) and
September 30, 1996........................................................................3
Consolidated Statements of Income for the Three-Month Periods
Ended March 31, 1997 and 1996 (unaudited) and the Six-Month Periods
Ended March 31, 1997 and 1996 (unaudited).................................................4
Consolidated Statements of Cash Flows for the Six-Month Periods Ended
March 31, 1997 and March 31, 1996 (unaudited).............................................5
Notes to Consolidated Financial Statements.........................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................................8
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,
ASSETS 1997 1996
------------------ ------------------
(unaudited)
Cash and due from banks $ 633,947 $ 834,621
Interest bearing deposits 11,745,423 14,230,056
Certificates of deposit 1,000,000 2,500,000
Available-for-sale securities 2,100,648 1,881,429
Held-to-maturity securities 11,524,081 10,502,766
Loans receivable, net 79,822,778 77,502,336
Accrued interest receivable 643,419 675,433
Premises and equipment, net 641,583 657,920
Other assets 75,076 168,113
------------------ ------------------
Total assets $ 108,186,955 $ 108,952,674
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 78,315,167 $ 76,946,210
Advance payments by borrowers for taxes and insurance 39,097 68,534
Income taxes payable 886,621 719,402
Dividends payable 372,365 391,633
Other liabilities 59,505 604,906
------------------ ------------------
Total liabilities 79,672,755 78,730,685
------------------ ------------------
Stockholders' equity:
Common stock, $0.10 par value, 5,000,000 shares authorized;
2,182,125 shares issued and outstanding 218,213 218,213
Additional paid-in capital 21,044,191 21,001,572
Retained earnings, substantially restricted 10,277,132 10,229,074
Net unrealized appreciation on available-for-sale securities 1,336,610 1,191,925
Treasury stock, 157,369 and 49,392 shares at cost as of
March 31, 1997 and September 30, 1996, respectively (2,790,826) (789,495)
Unallocated employee stock ownership plan (ESOP) shares (1,571,120) (1,629,300)
------------------ ------------------
Total stockholders' equity 28,514,200 30,221,989
------------------ ------------------
Total liabilities and stockholders' equity $ 108,186,955 $ 108,952,674
================== ==================
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,
1997 1996 1997 1996
-------------- ------------- ------------- ---------
Interest income:
Interest on loans $ 1,550,984 $ 1,470,529 $ 3,087,163 $ 2,962,127
Interest and dividends on securities 194,995 108,162 381,453 136,085
Other interest income 154,220 323,724 343,777 746,927
-------------- ------------- ------------- -------------
Total interest income 1,900,199 1,902,415 3,812,393 3,845,139
-------------- ------------- ------------- -------------
Interest expense:
Interest on deposits 937,371 975,272 1,888,557 1,963,391
-------------- ------------- ------------- -------------
Net interest income 962,828 927,143 1,923,836 1,881,748
Provision for loan losses
-------------- ------------- ------------- -------------
Net interest income after provision
for loan losses 962,828 927,143 1,923,836 1,881,748
-------------- ------------- ------------- -------------
Non-interest income:
Loan and other service fees, net 16,355 17,079 31,741 36,485
Other 4,096 5,556 8,687 11,081
-------------- ------------- ------------- -------------
Total non-interest income 20,451 22,635 40,428 47,566
-------------- ------------- ------------- -------------
Non-interest expense:
Compensation and benefits 229,980 212,175 454,618 411,325
Occupancy expenses, net 31,889 28,832 62,072 60,170
Federal and other insurance premiums 13,588 68,485 52,105 114,837
Data processing expenses 26,253 24,532 51,550 47,561
State franchise tax 23,587 24,142 47,730 44,751
Other operating expenses 119,580 108,527 207,243 192,481
-------------- ------------- ------------- -------------
Total non-interest expense 444,877 466,693 875,318 871,125
-------------- ------------- ------------- -------------
Income before income tax expense 538,402 483,085 1,088,946 1,058,189
Income tax expense 184,384 171,648 373,053 367,184
-------------- ------------- ------------- -------------
Net income $ 354,018 $ 311,437 $ 715,893 $ 691,005
============== ============= ============= =============
Earnings per share $ 0.19 $ 0.16 $ 0.38 $ 0.34
============== ============= ============= =============
See accompanying notes to consolidated financial statements.
4
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
---------------------------
For the Six-Month Periods
Ended March 31,
---------------------------------------
1997 1996
-------------- -------------
Cash flows from operating activities:
Net income $ 715,893 $ 691,005
Adjustments to reconcile net income to net cash
provided by operating activities:
ESOP benefit expense 100,799 79,965
Provision for depreciation 31,993 31,006
Amortization of loan fees (20,933) (29,313)
FHLB stock dividend (42,000) (39,300)
Change in:
Interest receivable 32,014 (51,556)
Interest payable 1,140 (1,166)
Accrued liabilities (546,541) 1,953
Prepaid expense 93,037 81,008
Income taxes payable 92,685 65,645
-------------- -------------
Net cash provided by operating activities 458,087 829,247
-------------- -------------
Cash flows from investing activities:
Net (increase) decrease in loans (2,299,509) 1,862,820
Maturity of certificates of deposit 1,500,000 1,500,000
Purchase of held-to-maturity securities (1,000,502) (4,213,019)
Principle repayments - mortgage back securities 21,187 22,869
Purchase of fixed assets (15,656) (85,904)
-------------- -------------
Net cash provided (used) by investing activities (1,794,480) (913,234)
-------------- -------------
Cash flows from financing activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts 193,481 619,972
Net increase (decrease) in certificates of deposit 1,175,476 122,200
Net increase (decrease) in custodial accounts (29,437) (49,530)
Payment of conversion expenses (365,414)
Purchase of treasury stock (2,001,331)
Payment of dividends (687,103)
--------------- ---------------
Net cash provided (used) by financing activities (1,348,914) 327,228
--------------- ---------------
Increase (decrease) in cash and cash equivalents (2,685,307) 243,241
Cash and cash equivalents, beginning of period 15,064,677 21,990,430
--------------- ---------------
Cash and cash equivalents, end of period $ 12,379,370 $ 22,233,671
=============== ===============
Supplemental Disclosures
Cash payments for:
Interest on deposits $ 1,887,419 $ 1,965,659
============== =============
Income taxes $ 225,000 $ 266,111
============== =============
See accompanying notes to consolidated financial statements.
5
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"). Since the Conversion,
the Company's primary assets have been the outstanding capital stock
of the Bank, 50% of the net proceeds of the Conversion, and a note
receivable from the Company's Employee Stock Ownership Plan ("ESOP"),
and its sole business is that of the Bank. Accordingly, the
consolidated 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,
1997 are not necessarily indicative of results that may be expected
for the entire fiscal year ending September 30, 1997.
2. Earnings Per Share
Earnings per share for the three and six month periods ended March 31,
1997 amounted to $0.19 per share and $0.38 per share, respectively,
based on weighted average common stock shares outstanding. The
weighted average number of common shares outstanding for the three and
six month periods ended March 31, 1997 was 1,869,800 and 1,903,134
shares, respectively. Earnings per share for the three and six month
periods ended March 31, 1996 amounted to $0.16 per share and $0.34 per
share, respectively, based on weighted average common stock shares
outstanding. The weighted average number of common shares outstanding
for the three and six month periods ended March 31, 1996 was 2,011,920
and 2,010,465 shares, respectively.
3. Dividends
On March 17, 1997, the Board of Directors of the Company authorized
the payment of a cash dividend of $.20 per share to all shareholders
of record on March 31, 1997 payable on April 15, 1997. The total
dividends paid by the Company for the six months ended March 31, 1997
amounted to $687,103.
4. Treasury Stock
Pursuant to the stock repurchase plan approved by the Board of
Directors of the Company on September 16, 1996, the Company
repurchased a total of 7,220 shares at a total price of $133,045
during the three months ended March 31, 1997. During the six months
ended March 31, 1997, a total of 157,369 shares had been repurchased
at a total price of $2,790,826.
6
5. Subsequent Event - Employee Benefit Plans
On January 27, 1997 the stockholders of the Company approved the
establishment of the Harrodsburg First Financial Bancorp, Inc. 1996
Stock Option Plan ("Option Plan") and the First Federal Savings Bank
of Harrodsburg Restricted Stock Plan and Trust Agreement ("Restricted
Stock Plan").
Pursuant to the Option Plan, which is effective January 27, 1997,
200,000 authorized but unissued shares of common stock have been
reserved for issuance upon the exercise of options or the grant of
restricted stock to employees and directors of the Company or the
Bank. Effective with the approval of the Option Plan by the
stockholders, stock options were granted for the purchase of 190,000
shares. The options are exercisable at the fair market of the common
stock on the date of the award which was $16.50 per share. All options
are nontransferable and have a maximum term of 10 years.
The objective of the Restricted Stock Plan, which is effective January
27, 1997, is to enable the Bank to attract and retain personnel of
experience and ability in key positions of responsibility. Those
eligible to receive benefits under the Restricted Stock Plan will be
such employees as selected by members of a committee appointed by the
Company's Board of Directors. The Restricted Stock Plan is a
non-qualified plan that will be managed through a separate trust. The
Bank will contribute sufficient funds to the ERP Trust for the
purchase of up to 85,000 shares of common stock. The Company will
recognize an expense for the fair market value of any awards granted
over the period the award is earned.
7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended March 31, 1997 and 1996
Net Income
Net income increased by $43,000 or 13.7% for the three months ended March 31,
1997 as compared to the same period in 1996. The net increase of $43,000 was due
to an increase of $36,000 in net interest income, and a decrease of $22,000 in
non-interest expense offset by a $2,000 decrease in non-interest income and a
$13,000 increase in income tax expense.
Interest Income
Interest income was $1.9 million, or 7.2% of average interest-earning assets,
for the quarter ended March 31, 1997 as compared to $1.9 million, or 7.1% of
average interest-earning assets, for the quarter ended March 31, 1996. Interest
income decreased by $2,000 or .1% from 1996 to 1997. The decrease in interest
income was due primarily to a $1.3 million decrease in the average balance of
interest-earning assets during the quarter ended March 31, 1997 compared to the
quarter ended March 31, 1996 offset by an increase of 8 basis point in the
average rate earned.
Interest Expense
Interest expense was $937,000, or 4.8% of average interest-bearing deposits, for
the quarter ended March 31, 1997 as compared to $975,000, or 5.1% of average
interest-bearing deposits, for the corresponding period in 1996. Interest
expense decreased by $38,000 or 3.9% from 1996 to 1997. The decrease in interest
expense was due primarily to a 26 basis point decrease in the average rate paid
on the deposits during the period ended March 31, 1997 compared to the
corresponding period in 1996 offset by an increase of $1.0 million in the
balance of average interest-bearing liabilities in 1997 compared to 1996.
Provision for Loan Losses
There was no provision for loan losses during the quarters ended March 31, 1997
and 1996. 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. At March 31, 1997 the
allowance for loan losses represented .37% of total loans compared to .40% at
March 31, 1996.
There can be no assurance that management will not decide to increase the
allowance for loan losses or that regulators, when reviewing the Bank's loan
portfolios in the future, will not request the Bank to increase such allowance,
either of which could adversely affect bank earnings. Further, there can be no
assurance that the Bank's actual loan losses will not exceed its allowance for
loan losses.
8
Non-Interest Income
Non-interest income amounted to $21,000 and $23,000 for the quarter ended March
31, 1997 and 1996, respectively. The largest item in non-interest income is
service fees on loan and deposit accounts, which amounted to $15,000 and $17,000
for the quarter ended March 31, 1997 and 1996, respectively. The decrease in
non-interest income of $2,000 was primarily due to the decrease in income from
late fees on delinquent loans plus an increase in service fees on deposit
transaction accounts.
Non-Interest Expense
Non-interest expense decreased $22,000 or 4.7% to $445,000 for the quarter ended
March 31, 1997 compared to $467,000 for the comparable period in 1996.
Non-interest expense was 1.7% of average assets for both quarters. The decrease
of $22,000 was due primarily to a decrease in federal and other insurance
premiums of $54,000 offset by an increase in compensation and benefits of
$18,000 and an increase in other operating expenses of $14,000. The decrease in
the federal and other insurance premiums of $54,000 was the result of the
reduction of the insurance assessment rate on the Bank's deposits after the
special assessment on September 30, 1996 to recapitalize the Savings Association
Insurance Fund. The increase of $18,000 in compensation and benefits was
primarily due to normal salary increases and an increase related to the employee
stock option plan due to the increase in the average price of the stock. The
increase of $14,000 in other operating expenses is related mainly to the
increase of franchise taxes.
Income Taxes
The provision for income tax expense amounted to $184,000 and $171,000 for the
quarters ended March 31, 1997 and 1996, respectively, which as a percentage of
income before income tax expense amounted to 34.2% for 1997 and 35.5% for 1996.
Results of Operations for the Six Months Ended March 31, 1997 and 1996
Net Income
Net income increased by $25,000 or 3.6% for the six month period ended March 31,
1997 as compared to the same period in 1996. The net increase of $25,000 was due
to an increase of $42,000 in net interest income offset by a decrease of $7,000
in non-interest income, $4,000 increase in non-interest expense and a $6,000
increase in income tax expense for the six month period ended March 31, 1997
compared to the same period in 1996.
Interest Income
Interest income was $3.8 million, or 7.2% of average interest-earning assets for
the six month periods ended March 31, 1997 and 1996. Interest income decreased
by $33,000 or .9% from 1996 to 1997. The decrease in interest income was due
primarily to a $620,000 decrease in the average balance of interest-earning
assets during the six month period ended March 31, 1997 compared to the six
month period ended March 31, 1996.
Interest Expense
Interest expense was $1.9 million, or 4.9% of average interest-bearing deposits,
for the six month period ended March 31, 1997 as compared to $2.0 million, or
5.2% of average interest-bearing deposits, for the corresponding period in 1996.
Interest expense decreased by $75,000 or 3.8% from 1996 to 1997. The
9
decrease in interest expense was due primarily to a 28 basis point decrease in
the average rate paid on the deposits offset by a $1.2 million increase in the
average balance of interest-bearing deposits during the period ended March 31,
1997 compared to the corresponding period in 1996.
Provision for Loan Losses
There was no provision for loan losses during the six month periods ended March
31, 1997 and 1996. 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.
Non-Interest Income
Non-interest income amounted to $40,000 and $47,000 for the six month period
ended March 31, 1997 and 1996, respectively. The largest item in non-interest
income is service fees on loan and deposit accounts, which amounted to $30,000
and $37,000 for the six month period ended March 31, 1997 and 1996,
respectively. The decrease in non-interest income of $7,000 was primarily due to
the decrease in income from late fees on delinquent loans plus a decrease in
deposit transaction service fees.
Non-Interest Expense
Non-interest expense increased $4,000 or .5% to $875,000 for the six month
period ended March 31, 1997 compared to $871,000 for the comparable period in
1996. Non-interest expense was 1.6% of average assets for both periods. The
increase of $4,000 was due primarily to an increase in compensation and benefits
of $43,000 and an increase in other operating expense of $24,000 offset by a
decrease of $63,000 in federal and other insurance premiums. The increase of
$43,000 in compensation and benefits was primarily due to normal salary
increases and an increase related to the employee stock option plan due to the
increase in the average price of the stock. The increase in other operating
expenses relates primarily to the increase of franchise taxes. The decrease of
$63,000 in federal and other insurance premiums was the result of the reduction
of the insurance assessment rate on the Bank's deposits after the special
assessment on September 30, 1996 to recapitalize the Savings Association
Insurance Fund.
Income Taxes
The provision for income tax expense amounted to approximately $373,000 and
$367,000 for the six month period ended March 31, 1997 and 1996, respectively,
which as a percentage of income before income tax expense amounted to a 34.3%
for 1997 and 34.7% for 1996.
10
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, 1997 September 30, 1996
-------------- ------------------
(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.................................... 332 567
Other ...................................... 52 58
Commercial..................................... -- --
Consumer......................................... 127 241
------------- -------------
Total................................. 511 866
============= =============
Total of non-accrual and 90 day past
due loans............................. $ 511 $ 866
============= =============
Percentage of net loans.............................. .64% 1.12%
============= =============
Other non-performing assets(2)...................... $ -- $ --
============= =============
(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. This property is carried at the lower of its fair
market value or the principal balance of the related loan, whichever is
lower.
At March 31, 1997, the Bank did not have any loans in non-accrual status.
Accordingly, all income earned for the six months ended March 31, 1997 on the
loans in the table above has been included in income.
At March 31, 1997, 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.
11
Financial Condition
The Company's consolidated assets decreased approximately $765,000 or .7% to
$108.2 million at March 31, 1997 compared to $108.9 million at September 30,
1996. Investment securities increased $1.2 million, loans increased $2.3
million, and cash, interest bearing deposits, and certificates of deposit
decreased a total of $4.2 million.
The Company's investment portfolio increased approximately $1.2 million.
Securities classified as available-for-sale and recorded at market value per
SFAS No. 115 increased $220,000 due solely to the increase in market value of
such securities. Held-to-maturity securities increased $1.0 million due to the
purchase of FHLB bonds, based on management's decision to seek higher yields on
funds available for investment.
Under SFAS No. 115, unrealized gains or losses on available-for-sale securities
are recorded net of deferred income tax as a separate component of stockholders'
equity. At March 31, 1997, the Company included net unrealized gains of
approximately $1,337,000 in stockholders' equity. At September 30, 1996, the
Company included net unrealized gains of approximately $1,192,000 in
stockholders' equity. 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 $2.3 million, or 3.0% from $77.5 million at
September 30, 1996 to $79.8 million at March 31, 1997, as management continued
its efforts to meet the local demand in the Bank's market area.
Deposits increased approximately $1.4 million or 1.8% from $76.9 million at
September 30, 1996 to $78.3 million at March 31, 1997. This increase reflects
the Company's competitively priced product line within the local market area.
Stockholders' equity decreased by $1.7 million to $28.5 million as of March 31,
1997. The net decrease of $1.7 million is due to a decrease of $2.0 million from
the purchase of Treasury Stock and the declaration of dividends totaling
$667,000, offset in part by net income of $716,000, an increase of $145,000 in
net unrealized appreciation on investments held-for-sale and an increase of
$101,000 related to the release of ESOP shares from collateral during the six
months ended March 31, 1997.
12
The following summarizes the Bank's capital requirements and position at March
31, 1997 and September 30, 1996.
March 31 September 30
1997 1996
------------------------------- -------------------------------
(Dollars in Thousands)
Amount Percent Amount Percent
-------------- -------------- ------------- --------------
Tangible capital....................... $ 22,565 20.9% $ 21,754 20.2%
Tangible capital requirement........... 1,603 1.5% 1,618 1.5%
-------------- -------------- ------------- --------------
Excess ........................ $ 20,962 19.4% $ 20,136 18.7%
============== ============== ============= ==============
Core capital ........................ $ 22,565 20.9% $ 21,754 20.2%
Core capital requirement............... 3,205 3.0% 3,235 3.0%
-------------- -------------- ------------- --------------
Excess ........................ $ 19,360 17.9% $ 18,519 17.2%
============== ============== ============= ==============
Tangible capital ...................... $ 22,565 41.1% $ 21,754 40.2%
General valuation allowance............ 290 .5% 290 .5%
-------------- -------------- ------------- --------------
Total capital (risk-based capital)..... 22,855 41.6% 22,044 40.7%
Risk-based capital requirement......... 4,391 8.0% 4,334 8.0%
-------------- -------------- ------------- --------------
Excess ........................ $ 18,464 33.6% $ 17,710 32.7%
============== ============== ============= ==============
Liquidity
The liquidity of the Company depends primarily on the dividends paid to it as
the sole shareholder of the Bank. At March 31, 1997, the Bank could pay common
stock dividends of approximately $11.7 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, 1997, 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.
The Company's operating activities produced positive cash flows for the six
month periods ended March 31, 1997 and 1996.
The Bank's most liquid assets are cash and cash-equivalents, which include
investments in highly liquid, short-term investments. At March 31, 1997 and
1996, cash and cash equivalents totaled $12.4 million and $22.2 million,
respectively.
13
At March 31, 1997, the Bank had $41.5 million in certificates of deposits due
within one year and $17.5 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, 1997, the Bank had
$574,000 in outstanding commitments to originate mortgages, excluding $950,000
in approved but unused home equity lines of credit and $675,000 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
5.0%. During the first six months of fiscal year 1997, 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.
14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...........................................................................None
Item 2. Changes in Securities.......................................................................None
Item 3. Defaults Upon Senior Securities.............................................................None
Item 4. Submission of Matters to a Vote of Security Holders.........................................None
Item 5. Other Information...........................................................................None
Item 6. Exhibits and Reports on Form 8-K
Form 8-K, Item 5 filed on March 18, 1997 relating to the
Company's announcement of the declaration of a cash dividend.
Form 8-K, Item 5 filed on February 11, 1997 relating to the
Company's announcement of its intention to implement the 1996
Restricted Stock Plan as previously approved by stockholders.
The following exhibit is filed herewith:
Exhibit 27...............................................................Financial Data Schedule
15
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.
Date: May 9, 1997
____________________________________________
Jack Hood, President
(Duly Authorized Officer)
Date: May 9, 1997
____________________________________________
Teresa W. Noel, Treasurer
(Principal Financial and Accounting Officer)
16