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, 1998.
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 11, 1998, 1,947,143 shares of the registrant's common stock were
issued and outstanding.
Page 1 of 15 Pages Exhibit Index at Page N/A
CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998 (unaudited)
and September 30, 1997............................................3
Consolidated Statements of Income for the Three-Month Periods
Ended March 31, 1998 and 1997 (unaudited) and the Six-Month
Periods Ended March 31, 1998 and 1997 (unaudited).................4
Consolidated Statements of Cash Flows for the Six-Month Periods
Ended March 31, 1998 and March 31, 1997 (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...................................................14
Item 2. Changes in Securities...............................................14
Item 3. Defaults Upon Senior Securities.....................................14
Item 4. Submission of Matters to a Vote of Security Holders.................14
Item 5. Other Information...................................................14
Item 6. Exhibits and Reports on Form 8-K....................................14
SIGNATURES
2
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
----------------------------
As of As of
March 31, September 30,
ASSETS 1998 1997
------------ ------------
(unaudited)
Cash and due from banks $ 537,132 $ 739,782
Interest bearing deposits 7,672,263 11,881,011
Certificates of deposit 600,000
Available-for-sale securities 3,656,862 2,717,352
Held-to-maturity securities 11,597,726 11,064,606
Loans receivable, net 83,967,992 81,261,278
Accrued interest receivable 674,445 641,324
Premises and equipment, net 652,672 656,197
Other assets 60,995 76,771
------------- -------------
Total assets $ 108,820,087 $ 109,638,321
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 78,075,184 $ 78,629,205
Advance payments by borrowers for taxes and insurance 40,922 66,070
Dividends payable 359,170
Income taxes payable 1,486,049 1,003,636
Other liabilities 65,292 166,587
------------- -------------
Total liabilities 80,026,617 79,865,498
------------- -------------
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 21,116,378 21,077,238
Retained earnings, substantially restricted 10,649,030 11,037,504
Net unrealized appreciation on available-for-sale securities,
net of deferred income taxes 2,363,711 1,743,634
Treasury stock, 234,982 and 157,369 shares at cost as of
March 31, 1998 and September 30, 1997, respectively (4,099,122) (2,790,826)
Unallocated employee stock ownership plan (ESOP) shares (1,454,740) (1,512,940)
-------------- -------------
Total stockholders' equity 28,793,470 29,772,823
------------- -------------
Total liabilities and stockholders' equity $ 108,820,087 $ 109,638,321
============= =============
See accompanying notes to consolidated financial statements.
3
HARRODSBURG FIRST FINANCIAL BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
----------------------------
For the Three-Month Period For the Six-Month Periods
Ended March 31 Ended March 31,
-------------------------------- -------------------------------
1998 1997 1998 1997
-------------- -------------- ------------- -------------
Interest income:
Interest on loans $ 1,657,143 $ 1,550,984 $ 3,279,832 $ 3,087,163
Interest and dividends on securities 196,358 194,995 391,060 381,453
Other interest income 101,222 154,220 236,758 343,777
-------------- -------------- ------------- -------------
Total interest income 1,954,723 1,900,199 3,907,650 3,812,393
-------------- -------------- ------------- -------------
Interest expense:
Interest on deposits 959,986 937,371 1,944,911 1,888,557
-------------- -------------- -------------- -------------
Net interest income 994,737 962,828 1,962,739 1,923,836
Provision for loan losses 40,000 75,000
-------------- -------------- ------------- -------------
Net interest income after provision
for loan losses 954,737 962,828 1,887,739 1,923,836
-------------- -------------- ------------- -------------
Non-interest income:
Loan and other service fees, net 20,887 16,355 40,081 31,741
Other 8,994 4,096 13,602 8,687
-------------- -------------- ------------- -------------
Total non-interest income 29,881 20,451 53,683 40,428
-------------- -------------- -------------- -------------
Non-interest expense:
Compensation and benefits 236,061 229,980 463,614 454,618
Occupancy expenses, net 34,174 31,889 71,323 62,072
Federal and other insurance premiums 13,122 13,588 26,195 52,105
Data processing expenses 28,647 26,253 55,090 51,550
State franchise tax 23,819 23,587 47,406 47,730
Other operating expenses 103,662 119,580 186,763 207,243
-------------- -------------- ------------- -------------
Total non-interest expense 439,485 444,877 850,391 875,318
-------------- -------------- ------------- -------------
Income before income tax expense 545,133 538,402 1,091,031 1,088,946
Income tax expense 185,344 184,384 370,950 373,053
-------------- -------------- ------------- -------------
Net income $ 359,789 $ 354,018 $ 720,081 $ 715,893
============== ============== ============= =============
Earnings per common share $ 0.20 $ 0.19 $ 0.39 $ 0.38
============== ============== ============= =============
Earnings per common share
assuming dilution $ 0.20 $ 0.19 $ 0.39 $ 0.38
============== ============== ============= =============
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,
--------------------------------
1998 1997
-------------- --------------
Cash flows from operating activities:
Net income $ 720,081 $ 715,893
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 75,000
Amortization of investment premium 1,565
Gain on sale of fixed assets (5,394)
ESOP benefit expense 97,338 100,799
Provision for depreciation 35,209 31,993
Amortization of loan fees (27,601) (20,933)
FHLB stock dividend (46,700) (42,000)
Change in:
Interest receivable (33,121) 32,014
Interest payable 419 1,140
Accrued liabilities (101,712) (546,541)
Prepaid expense 15,776 93,037
Income taxes payable 162,980 92,685
-------------- --------------
Net cash provided by operating activities 893,840 458,087
-------------- --------------
Cash flows from investing activities:
Net (increase) decrease in loans (2,754,113) (2,299,509)
Maturity of certificates of deposit 600,000 1,500,000
Purchase of held-to-maturity securities (1,000,000) (1,000,502)
Maturity of securities held-to-maturity 500,000
Principle repayments - mortgage back securities 12,015 21,187
Purchase of fixed assets (31,684) (15,656)
Sale of fixed assets 5,394
-------------- --------------
Net cash provided (used) by investing activities (2,668,388) (1,794,480)
-------------- --------------
Cash flows from financing activities:
Net increase (decrease) in demand deposits, NOW accounts and savings accounts 12,454 193,481
Net increase (decrease) in certificates of deposit (566,475) 1,175,476
Net increase (decrease) in custodial accounts (25,148) (29,437)
Purchase of treasury stock (1,308,296) (2,001,331)
Payment of dividends (749,385) (687,103)
-------------- ---------------
Net cash provided (used) by financing activities (2,636,850) (1,348,914)
-------------- ---------------
Increase (decrease) in cash and cash equivalents (4,411,398) (2,685,307)
Cash and cash equivalents, beginning of period 12,620,793 15,064,677
-------------- ---------------
Cash and cash equivalents, end of period $ 8,209,395 $ 12,379,370
============== ===============
Supplemental Disclosures
Cash payments for:
Interest on deposits $ 1,944,492 $ 1,887,419
============== ===============
Income taxes $ 310,000 $ 225,000
============== ===============
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"). 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, 1998 are
not necessarily indicative of results that may be expected for the
entire fiscal year ending September 30, 1998.
2. Earnings Per Share
Earnings per share for the three and six month periods ended March 31,
1998 amounted to $0.20 per share and $0.39 per share, based on weighted
average common shares outstanding of 1,823,697 and 1,831,650,
respectively. Earnings per share for the three and six month periods
ended March 31, 1998 amounted to $0.20 per share and $0.39 per share,
based on weighted average common shares outstanding after dilutive
effect of 1,825,860 and 1,833,701, respectively. 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, based on weighted average common stock
shares outstanding of 1,869,800 and 1,903,139, respectively. For the
three and six months periods ended March 31, 1997 , there were no
common stock equivalents, which had a dilutive effect on earnings.
3. Dividends
On March 16, 1998, 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, 1998 payable on April 15, 1998. The total dividends
paid by the Company for the six months ended March 31, 1998 amounted to
$749,385.
4. Treasury Stock
Pursuant to the stock repurchase plan approved by the Board of
Directors of the Company on September 15, 1997, the Company repurchased
a total of 38,500 shares at a total price of $649,868 during the three
months ended March 31, 1998. During the six months ended March 31,
1998, a total of 77,613 shares had been repurchased at a total price of
$1,308,296.
6
5. Possible Year 2000 Computer Program Problems
A great deal of information has been disseminated about the global
computer crash that may occur in the year 2000. Many computer programs
that can only distinguish the final two digits of the year entered (a
common programming practice in earlier years) are expected to read
entries for the year 2000 as the year 1900 and compute payment,
interest, or delinquency based on the wrong date or are expected to be
unable to compute payment, interest, or delinquency. Rapid and accurate
data processing is essential to the operations of the Company. Data
processing is also essential to most other financial institutions and
many other companies.
All of the material data processing applications of the Company that
could be affected by this problem are provided by a third party service
bureau. The service bureau used by the Company has advised the Company
that it expects to resolve this potential problem before the year 2000.
However, if the service bureau is unable to resolve this problem in
time, the Company would likely experience significant data processing
delays, mistakes, and failures. These delays, mistakes, and failures
could have a significant adverse impact on the financial condition and
results of operations of the Company.
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, 1998 and 1997
Net Income
Net income increased by $6,000 or 1.6% for the three months ended March 31, 1998
as compared to the same period in 1997. The net increase of $6,000 was due to an
increase of $32,000 in net interest income, a decrease of $5,000 in non-interest
expense, and a $9,000 increase in non-interest income offset by an increase of
$40,000 in the provision for loan losses.
Interest Income
Interest income was $2.0 million, or 7.3% of average interest-earning assets,
for the quarter ended March 31, 1998 as compared to $1.9 million, or 7.2% of
average interest-earning assets, for the quarter ended March 31, 1997. Interest
income increased by $54,000 or 2.9% from 1997 to 1998. The increase in interest
income was due to an $840,000 increase in the average balance of
interest-earning assets during the quarter ended March 31, 1998 compared to the
quarter ended March 31, 1997 and an increase of 15 basis point in the average
rate earned.
Interest Expense
Interest expense was $960,000, or 4.9% of average interest-bearing deposits, for
the quarter ended March 31, 1998 as compared to $937,000, or 4.8% of average
interest-bearing deposits, for the corresponding period in 1997. Interest
expense increased by $23,000 or 2.4% from 1997 to 1998. The increase in interest
expense was due primarily to a 16 basis point increase in the average rate paid
on the deposits during the period ended March 31, 1998 compared to the
corresponding period in 1997.
Provision for Loan Losses
The provision for loan losses during the quarter ended March 31, 1998 amounted
to $40,000 as compared to no provision for the corresponding period in 1997.
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, 1998 the
allowance for loan losses represented .45% of total loans compared to .37% at
March 31, 1997.
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.
Non-Interest Income
Non-interest income amounted to $30,000 and $21,000 for the quarter ended March
31, 1998 and 1997, respectively. The largest item in non-interest income is
service fees on loan and deposit accounts, which
8
amounted to $21,000 and $16,000 for the quarter ended March 31, 1998 and 1997,
respectively. The increase in non-interest income of $9,000 was primarily due to
the increase 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 $5,000 or 1.2% to $439,000 for the quarter ended
March 31, 1998 compared to $444,000 for the comparable period in 1997.
Non-interest expense was 1.6% and 1.7% of average assets for the quarters ended
March 31, 1998 and 1997, respectively. The decrease of $5,000 was primarily due
to a decrease in other operating expenses of $15,000 offset by an increase in
compensation and benefits of $6,000 and an increase of $4,000 in all other
non-operating expense classifications.
Income Taxes
The provision for income tax expense amounted to $185,000 and $184,000 for the
quarters ended March 31, 1998 and 1997, respectively, which as a percentage of
income before income tax expense amounted to 34.0% for 1998 and 34.2% for 1997.
Results of Operations for the Six Months Ended March 31, 1998 and 1997
Net Income
Net income increased by $4,000 or .6% for the six month period ended March 31,
1998 as compared to the same period in 1997. The net increase of $4,000 was due
to an increase of $39,000 in net interest income, an increase of $14,000 in
non-interest income, a $24,000 decrease in non-interest expense, and a $2,000
decrease in income tax expense offset by an increase of $75,000 in the provision
for loan losses for the six month period ended March 31, 1998 compared to the
same period in 1997.
Interest Income
Interest income was $3.9 million, or 7.3% of average interest-earning assets for
the six month period ended March 31, 1998 compared to $3.8 million, or 7.2% of
average-earning assets for the six month period ended March 31, 1997. Interest
income increased by $95,000 or 2.5% from 1997 to 1998. The increase in interest
income was due to a $1.0 million increase in the average balance of
interest-earning assets during the six month period ended March 31, 1998
compared to the six month period ended March 31, 1997 and an increase of 11
basis points in the average rate earned.
Interest Expense
Interest expense was $2.0 million, or 5.0% of average interest-bearing deposits,
for the six month period ended March 31, 1998 as compared to $1.9 million, or
4.9% of average interest-bearing deposits, for the corresponding period in 1997.
Interest expense increased by $56,000 or 3.0% from 1997 to 1998. The increase in
interest expense was due primarily to a 16 basis point increase in the average
rate paid on the deposits ended March 31, 1998 compared to the corresponding
period in 1997.
9
Provision for Loan Losses
The provision for loan losses during the six month period ended March 31, 1998
amounted to $75,000 as compared to no provision for the corresponding period in
1997. 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 $54,000 and $40,000 for the six month period
ended March 31, 1998 and 1997, respectively. The largest item in non-interest
income is service fees on loan and deposit accounts, which amounted to $40,000
and $32,000 for the six month period ended March 31, 1998 and 1997,
respectively. The increase in non-interest income of $14,000 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 decreased $25,000 or 2.8% to $850,000 for the six month
period ended March 31, 1998 compared to $875,000 for the comparable period in
1997. Non-interest expense was 1.6% of average assets for both periods. The
decrease of $25,000 was due primarily to an increase in compensation and
benefits of $9,000 plus an increase of $9,000 in occupancy expense offset by a
decrease in other operating expense of $20,000 and a decrease of $26,000 in
federal and other insurance premiums. The increase of $9,000 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 decrease in other operating expenses relates primarily to the
decrease of franchise taxes and legal fees. The decrease of $26,000 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 $371,000 and
$373,000 for the six month period ended March 31, 1998 and 1997, respectively,
which as a percentage of income before income tax expense amounted to a 34.0%
for 1998 and 34.3% for 1997.
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, September 30,
1998 1997
------------ ------------
(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............................................... 337 387
Other..................................................... 33 73
Commercial................................................ -- --
Consumer.................................................... 109 60
------------ ------------
Total................................................... 479 520
============ ============
Total of non-accrual and 90 day past due loans............ $ 479 $ 520
============ ============
Percentage of net loans........................................ .57% .64%
============ ============
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, 1998, the Bank did not have any loans in non-accrual status.
Accordingly, all income earned for the six months ended March 31, 1998 on the
loans in the table above has been included in income.
At March 31, 1998, 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 $818,000 or .7% to
$108.8 million at March 31, 1998 compared to $109.6 million at September 30,
1997. The net decrease of $818,000 was due primarily to a decrease of $5.0
million in cash, interest-bearing deposits and certificates of deposit offset by
a $1.5 million increase in investment securities and a $2.7 million increase in
loans receivable.
The Company's investment portfolio increased approximately $1.5 million.
Securities classified as available-for-sale and recorded at market value per
SFAS No. 115 increased $940,000 due solely to the increase in market value of
such securities. Held-to-maturity securities increased $533,000 primarily due to
the purchase of two $500,000 FHLB bonds offset by the call of a $500,000 FNMA
bond.
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, 1998, the Company included net unrealized gains of
approximately $2,364,000 in stockholders' equity. At September 30, 1997, the
Company included net unrealized gains of approximately $1,744,000 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 $2.7 million, or 3.3% from $81.3 million at
September 30, 1997 to $84.0 million at March 31, 1998, as management continued
its efforts to be competitive in meeting the local demand in the Bank's market
area.
Stockholders' equity decreased by $1.0 million to $28.8 million as of March 31,
1998. The net decrease of $1.0 million is due to a decrease of $1.3 million from
the purchase of Treasury Stock and the declaration of dividends totaling $1.1,
offset in part by net income of $720,000, an increase of $620,000 in net
unrealized appreciation on investments held-for-sale and an increase of $97,000
related to the release of ESOP shares from collateral during the six months
ended March 31, 1998. The following summarizes the Bank's capital requirements
and position at March 31, 1998 and September 30, 1997.
March 31 September 30
1998 1997
------------------------------- ------------------------------
(Dollars in Thousands)
Amount Percent Amount Percent
------ ------- ------ -------
Core capital ....................... $ 24,147 22.9% $ 23,392 21.3%
Core capital requirement............. 4,210 4.0% 3,210 3.0%
------------- -------------- ------------ -------------
Excess .............................. $ 19,937 18.9% $ 20,182 18.3%
============= ============== ============ =============
Tangible capital .................... $ 24,147 42.7% $ 23,392 42.7%
General valuation allowance.......... 313 .5% 235 .4%
------------- -------------- ------------ -------------
Total capital (risk-based capital)... 24,460 43.2% 23,627 43.1%
Risk-based capital requirement....... 4,525 8.0% 4,387 8.0%
------------- -------------- ------------ -------------
Excess .............................. $ 19,935 35.2% $ 19,240 35.1%
============= ============== ============ =============
12
Liquidity
The liquidity of the Company depends primarily on the dividends paid to it as
the sole shareholder of the Bank. At March 31, 1998, the Bank could pay common
stock dividends of approximately $12.4 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, 1998, 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, 1998 and 1997.
The Bank's most liquid assets are cash and cash-equivalents, which include
investments in highly liquid, short-term investments. At March 31, 1998 and
1997, cash and cash equivalents totaled $8.2 million and $12.6 million,
respectively.
At March 31, 1998, the Bank had $43.0 million in certificates of deposits due
within one year and $15.4 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, 1998, the Bank had $1.5
million in outstanding commitments to originate mortgages, excluding $1.2
million in approved but unused home equity lines of credit and $670,000 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 1998, 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.
13
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 26,
1998. 1,629,285 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 two nominees for
director. The voting results for each nominee were as follows:
Votes in Votes
Nominee Favor of Election Withheld
--------------------- ----------------- ----------------
Thomas Les Letton 1,617,870 11,415
Jack L. Coleman, Jr. 1,615,945 13,340
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, 1998. Votes were cast as follows: 1,627,335
votes in favor and 1,950 votes abstaining.
Item 5. Other Information................................................None
Item 6. Exhibits and Reports on Form 8-K
Form 8-K, Item 5 filed on March 20, 1998 relating to the
Company's announcement of the declaration of a cash dividend.
The following exhibits are filed herewith:
Exhibit 27....................................Financial Data Schedule
Exhibit 99..............................Form 8-K dated March 20, 1998
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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.
Date: May 11, 1998 ---------------------------------
Jack Hood, President
(Duly Authorized Officer)
Date: May 11, 1998 ---------------------------------
Teresa W. Noel, Treasurer
(Principal Financial and Accounting
Officer)
15