-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D+vkOWrT0PZfl+en1WztRH5d9Zb1WTUdDkECAgGckqjmIkmSrl4s7XQLrVT3WRVE 5QDPcRWY0hHThCGxzon2Og== 0000950164-99-000011.txt : 19990217 0000950164-99-000011.hdr.sgml : 19990217 ACCESSION NUMBER: 0000950164-99-000011 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARDIN BANCORP INC CENTRAL INDEX KEY: 0000947220 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 431719104 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-26560 FILM NUMBER: 99540883 BUSINESS ADDRESS: STREET 1: 2ND & ELM STS STREET 2: P O BOX 608 CITY: HARDIN STATE: MO ZIP: 64035 BUSINESS PHONE: 8163984312 MAIL ADDRESS: STREET 1: 2ND & ELM STS STREET 2: P O BOX 608 CITY: HARDIN STATE: MO ZIP: 64035 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to ___________ Commission File Number 0-26560 HARDIN BANCORP, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its Charter) Delaware 43-1719104 - ---------------------------------------- --------------------------------------- State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization 2nd and Elm Street, Hardin, Missouri 64035 - ---------------------------------------- --------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (660) 398-4312 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Class Outstanding at December 31, 1998 --------------------------- -------------------------------- Common stock, .01 par value 739,492 HARDIN BANCORP, INC. AND SUBSIDIARIES CONTENTS PAGE ---- PART I FINANCIAL INFORMATION Item 1. Unaudited Financial Statements Consolidated Balance Sheets ............................................. 1 Consolidated Statements of Earnings ..................................... 2 Consolidated Statement of Stockholders' Equity .......................... 3 Consolidated Statements of Cash Flows ................................... 4-5 Notes to Consolidated Financial Statements .............................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................... 7-10 PART II OTHER INFORMATION ......................................................... 11 Signatures ................................................................ 12 Hardin Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited) December 31, 1998 March 31, 1998 ----------------- -------------- Assets ------ Cash ........................................ $ 954,714 $ 556,927 Interest bearing deposits ................... 4,408,887 3,224,874 Investment securities: Held-to-maturity .......................... 0 10,000,000 Available-for-sale ........................ 36,463,072 22,656,010 Mortgage-backed securities: Held-to-maturity .......................... 0 10,995,511 Available-for-sale ........................ 16,237,131 8,019,725 Loans receivable, net ....................... 67,055,955 61,273,984 Accrued interest receivable on: Investment securities ..................... 230,601 359,601 Mortgage-backed securities ................ 111,094 133,459 Loans receivable .......................... 462,044 395,138 Premises and equipment ...................... 1,831,124 1,725,383 Stock in Federal Home Loan Bank (FHLB) of Des Moines, at cost .................... 1,975,000 1,475,000 Prepaid expenses and other assets ........... 383,267 276,492 ============ ============ Total assets ................................ $130,112,889 $121,092,104 ============ ============ Liabilities and Stockholders' Equity ------------------------------------ Liabilities: Deposits .................................. $ 81,560,439 $ 76,884,462 Advances from borrowers for property taxes and insurance ..................... 142,748 264,317 Advances from FHLB ........................ 35,000,000 29,500,000 Accrued interest payable .................. 66,100 56,149 Income taxes payable: Current ................................. 262,982 323,520 Deferred ................................ (92,115) 15,000 Accrued expenses and other liabilities .... 765,744 571,084 ------------ ------------ Total liabilities ........................... 117,705,898 107,614,532 ------------ ------------ Stockholders' equity: Common stock, $.01 par value; 3,500,000 shares authorized, 1,058,000 shares issued .................................. 10,580 10,580 Serial preferred stock, $.01 par value; 500,000 shares authorized, none issued or outstanding .......................... 0 0 Additional paid in capital ................ 10,165,436 10,165,436 Retained earnings ......................... 7,980,161 7,482,320 Accumulated other comprehensive loss ...... (286,351) (98,326) Unearned employee stock ownership plan .... (518,280) (518,280) Deferred recognition and retention plan ... (260,554) (327,011) Treasury stock (318,508 and 234,440, shares at cost, respectively) ........... (4,684,001) (3,237,147) ------------ ------------ Total stockholders' equity .................. 12,406,991 13,477,572 ============ ============ Total liabilities and stockholders' equity .. $130,112,889 $121,092,104 ============ ============ See accompanying notes to unaudited consolidated financial statements. 1 Hardin Bancorp, Inc. and Subsidiaries Consolidated Statements of Earnings (Unaudited)
Three months ended Nine months ended December 31 December 31 ---------------------- ----------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Interest income: Loans receivable .................. $1,360,212 $1,216,168 $4,025,967 $3,544,154 Mortgage-backed securities ........ 242,204 314,122 789,541 913,308 Investment securities ............. 465,084 453,297 1,609,782 1,311,529 Other ............................. 150,108 117,974 307,932 329,969 ---------- ---------- ---------- ---------- Total interest income .................. 2,217,608 2,101,561 6,733,222 6,098,960 --------- --------- --------- --------- Interest expense: Deposits .......................... 980,127 981,643 2,942,508 2,866,427 FHLB advances ..................... 518,990 362,986 1,523,891 973,306 ---------- ---------- ---------- ---------- Total interest expense ................. 1,499,117 1,344,629 4,466,399 3,839,733 --------- --------- --------- --------- Net interest income .................... 718,491 756,932 2,266,823 2,259,227 Provision for loan losses .............. 18,800 24,094 50,000 78,671 ------ ------ ------ ------ et interest income after provision for loan losses ................... 699,691 732,838 2,216,823 2,180,556 ------- ------- --------- --------- Non-interest income: Service charges ................... 129,933 39,190 297,592 93,579 Loan servicing fees ............... 5,571 9,718 21,621 26,055 Gain on sale of loans held for sale 75,063 23,877 90,061 40,319 Gain on sale of real estate owned . 0 1,553 0 5,658 Gain on sale of investments and mortgage-backed securities .... 318,750 15,482 449,796 65,304 Other ............................. 42,488 36,949 97,226 88,919 ---------- ---------- ---------- ---------- Total non-interest income .............. 571,805 126,769 956,296 319,834 ------- ------- ------- ------- Non-interest expense: Compensation and benefits ......... 349,178 253,285 1,007,095 829,459 Occupancy and equipment ........... 57,618 37,781 176,398 99,957 Federal insurance premiums ........ 11,507 11,747 35,183 33,808 Data processing ................... 40,298 27,304 124,216 76,638 Other ............................. 185,169 183,797 532,973 467,349 ---------- ---------- ---------- ---------- Total non-interest expense ............. 643,770 513,914 1,875,865 1,507,211 ------- ------- --------- --------- Earnings before income taxes ........... 627,726 345,693 1,297,254 993,179 Income tax expense ..................... 227,884 126,267 467,663 365,336 ---------- ---------- ---------- ---------- Net earnings ........................... $ 399,842 $ 219,426 $ 829,591 $ 627,843 ========== ========== ========== ========== Net earnings per share: Basic ............................. $ 0.58 $ 0.29 $ 1.12 $ 0.80 ========== ========== ========== ========== Diluted ........................... 0.55 0.28 1.07 0.78 ==== ==== ==== ====
See accompanying notes to unaudited consolidated financial statements. 2 Hardin Bancorp, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity For the Nine Months Ended December 31, 1998 (Unaudited)
Unrealized Unearned Additional Gain or (loss) Employee Total Common Paid-in Retained on Stock Deferred Treasury Shareholders' Stock Capital Earnings Securities, net Ownership Plan RRP Stock Equity ----- ------- -------- --------------- -------------- -------- ----- ------ Balance at March 31, 1998 .... $10,580 10,165,436 7,482,320 (98,326) (518,280) (327,011) (3,237,147) 13,477,572 Comprehensive income: Net earnings ............. 0 0 829,591 0 0 0 0 829,591 Change in net unrealized loss on securities available for sale, net of tax 0 0 0 (188,025) 0 0 0 (188,025) ------ ---------- ----------- -------- -------- ----------- ---------- ----------- Total comprehensive income 0 0 829,591 (188,025) 0 0 0 641,566 ------ ---------- ----------- -------- -------- ----------- ---------- ----------- Purchase of 84,068 shares of treasury stock ............... 0 0 0 0 0 0 (1,446,854) (1,446,854) Amortization of recognition and retention plan ........... 0 0 0 0 0 66,457 0 66,457 Dividends declared ............ 0 0 (331,750) 0 0 0 0 (331,750) ====== ========== =========== ======== ======== =========== ========== =========== Balance at December 31, 1998 . 10,580 10,165,436 7,980,161 (286,351) (518,280) (260,554) (4,684,001) 12,406,991 ====== ========== =========== ======== ======== =========== ========== ===========
See accompanying notes to unaudited consolidated financial statements. 3 Hardin Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows Nine Months Ended December 31 (Unaudited) 1998 1997 ------------ ----------- Operating Activities: Net Earnings ................................... $ 829,591 627,843 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for losses on loans .............. 50,000 78,671 Depreciation ............................... 97,819 49,358 Premium accretion and amortization of discounts and deferred loan fees, net (171,741) 68,150 Net gain on sale of loans and investment and mortgage-backed securities .......... (539,857) (105,623) Gain on real estate owned .................. 0 (5,658) Proceeds from sale of loans ................ 3,485,600 0 Origination of loans held for sale ......... (3,204,865) 0 Amortization of deferred Recognition and Retention Plan (RRP) ................ 66,457 63,516 Changes in asset and liabilities: Interest receivable .................. 84,459 (203,954) Other assets ......................... (106,775) (7,125) Accrued interest payable ............. 9,951 43,610 Accrued expense and other liabilities 206,726 198,272 Income taxes payable ................. (60,538) 123,983 ------------ ------------ Net cash (used in) provided by operating activities .......................... 746,827 931,043 ------------ ------------ Investing Activities: Net increase in loans receivable .............. (6,034,725) (4,400,198) Purchase of loans receivable .................. 0 (1,072,050) Principal payments on mortgage-backed & related securities: Available-for-sale ......................... 4,186,148 5,652,390 Held-to-maturity ........................... 1,026,694 1,629,717 Purchase of available-for-sale mortgage- backed securities ............................ 0 (7,819,121) Proceeds from sales of available-for-sale mortgage-backed securities ................. 0 4,895,433 Purchase of available-for-sale investment securities ....................... (32,244,489) (22,559,088) Proceeds from maturities of available-for-sale investment securities ....................... 8,000,000 12,650,000 Proceeds from sales of available for sale investment securities ...................... 18,341,167 3,077,897 Purchase of stock in FHLB of Des Moines ....... (500,000) (375,000) Proceeds from sales of real estate owned ...... 0 117,340 Purchase of office properties and equipment ... (203,560) (634,293) ------------ ------------ Net cash used in investing activities .......... (7,428,765) (8,836,973) ------------ ------------ 4 Hardin Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows Nine Months Ended December 31, 1998 and 1997 (Unaudited) 1998 1997 ----------- ------------- Financing Activities: Net increase in savings deposits ............. 4,675,977 6,441,352 Proceeds from FHLB advances .................. 18,000,000 20,500,000 Repayments of FHLB advances .................. (12,500,000) (15,000,000) Net decrease in advances from borrowers for taxes and insurance ....................... (121,569) (162,366) Payment of dividends ......................... (343,816) (292,183) Purchase of treasury stock ................... (1,446,854) (641,745) ----------- ------------ Net cash provided by financing activities ...... 8,263,738 10,845,058 ----------- ------------ Increase in cash ............................... 1,581,800 2,939,128 Cash at beginning of period .................... 3,781,801 4,265,909 ----------- ------------ Cash at end of period .......................... $ 5,363,601 7,205,037 =========== ============ Supplemental disclosure of cash flow information: Cash paid for: Interest .................................. $ 4,456,448 3,796,123 Income taxes, net of refunds .............. $ 528,201 241,353 Non-cash investing and financing: Loans transferred to real estate owned ....... 0 8,272 Dividends declared and payable ............... $ 118,319 98,827 Transfer of investment and mortgage-backed securities from held-to-maturity to available-for-sale ......................... $ 19,951,798 0 See accompanying notes to unaudited consolidated financial statements. 5 HARDIN BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (1) Basis of Presentation The accompanying unaudited consolidated financial statements of Hardin Bancorp, Inc. and subsidiaries have been prepared in accordance with instructions for Form 10-QSB. To the extent that information and footnotes required by generally accepted accounting principles for complete financial statements are contained in the audited financial statements included in the Company's Annual Report for the year ended March 31, 1998, such information and footnotes have not been duplicated herein. In the opinion of management, all adjustments, consisting only of normal recurring accruals, which are necessary for the fair presentation of the interim financial statements have been included. The statement of earnings for the nine month period ended December 31, 1998 is not necessarily indicative of the results, which may be expected for the entire year. The March 31, 1998 consolidated balance sheet has been derived from the audited consolidated financial statements as of that date. (2) Earnings Per Share Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share includes the effect of potential dilutive common shares (stock options) outstanding during the period. The shares used in the calculation of basic and diluted earnings per share are shown below: For the three For the nine months ended months ended December 31 December 31 ------------------- -------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Basic weighted average shares ................... 691,546 765,591 738,664 781,389 Common stock equivalents/ stock options ............ 30,833 32,218 33,059 27,629 ------- ------- ------- ------- Diluted weighted average shares ................... 722,379 797,809 771,723 809,018 ======= ======= ======= ======= (3) Comprehensive Income On April 1, 1998 the Company adopted SFAS No. 130, "Reporting Comprehensive Income" which requires the reporting of comprehensive income and its components. Comprehensive income is defined as the change in equity from transactions and other events and circumstances from non-owner sources and excludes investments by and distributions to owners. Comprehensive income includes net income and other items of comprehensive income meeting the above criteria. The Company's only component of other comprehensive income is the unrealized holding gains and losses on available-for-sale securities. For the three For the nine months ended months ended December 31 December 31 -------------------- --------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Unrealized holding gains (losses) ............... (129,924) 89,814 154,655 243,941 Less: reclassification adjustment for gains included in net income . 318,750 15,482 449,796 65,304 -------- -------- -------- -------- Net unrealized gains (losses) on securities . (448,674) 74,332 (295,141) 178,637 Income tax expense (benefit) .............. (163,923) 27,503 (107,116) 65,676 -------- -------- -------- -------- Other comprehensive income (loss) .......... (284,751) 46,829 (188,025) 112,961 ======== ======== ======== ======== 6 HARDIN BANCORP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Hardin Bancorp, Inc. (the "Company") was incorporated under the laws of the state of Delaware to become a savings bank holding company with Hardin Federal Savings Bank (the "Bank") of Hardin, Missouri, as its subsidiary. The holding company was incorporated at the direction of the Board of Directors of the Bank, and on September 28, 1995, acquired all of the capital stock of the Bank upon its conversion from mutual to stock form (the "conversion"). Prior to the conversion, the holding company did not engage in any material operations. Hardin Federal Savings Bank was originally founded in 1888 as a Missouri chartered savings and loan association located in Hardin, Missouri. On March 21, 1995, the Bank's members voted to convert the Bank to a Federal mutual charter. The Bank conducts its business through its main office in Hardin, Ray County, and two full service branch offices located in Richmond, Ray County, and Excelsior Springs, Clay County, Missouri. Deposits are insured by the Federal Deposit Insurance Corporation (FDIC) to the maximum allowable. The Bank is principally engaged in the business of attracting retail savings deposits from the general public and investing those funds in first mortgage loans on owner occupied, single-family residential loans, commercial real estate loans, mortgage-backed securities, U.S. Government and agency securities, and insured interest bearing deposits. The Bank also originates consumer loans for the purchase of automobiles, home improvement, and home equity lines of credit. The most significant outside factors influencing the operations of the Bank and other financial institutions include general economic conditions, competition in the local market place and the related monetary and fiscal policies of agencies that regulate financial institutions. More specifically, the cost of funds primarily consisting of insured deposits is influenced by interest rates on competing investments and general market rates of interest, while lending activities are influenced by the demand for real estate financing and other types of loans, which in turn is affected by the interest rates at which such loans may be offered and other factors affecting loan demand and funds availability. The deposits of the Bank are insured by the Savings Association Insurance Fund (SAIF), which together with the Bank Insurance Fund (BIF), are the two insurance funds administered by the FDIC. FINANCIAL CONDITION Consolidated assets of Hardin Bancorp, Inc. were $130,112,889 as of December 31, 1998, as compared to $121,092,104 on March 31, 1998, an increase of $9,020,785. An increase in deposits of $4,675,977 and an increase in advances from the Federal Home Loan Bank of Des Moines in the amount of $5,500,000 primarily funded the increase. Loans receivable, net, increased to $67,055,955 on December 31, 1998 from $61,273,984 on March 31, 1998, an increase of $5,781,971. Mortgage-backed securities decreased $2,778,105 to $16,237,131 on December 31, 1998, from $19,015,236 on March 31, 1998. The decrease in mortgage-backed securities and the increase in loans reflect the Bank's plan to increase the loan portfolio and decrease mortgage-backed securities to improve the overall yield on interest earning assets. Cash, interest bearing deposits and available for sale investment securities increased $5,388,862 from $36,437,811 on March 31, 1998, to $41,826,673 on December 31, 1998. The increase was primarily funded by an increase in savings deposits and FHLB advances. Deposits totaled $81,560,439 on December 31, 1998, an increase of $4,675,977 from $76,884,462 on March 31, 1998. The increase in deposits is primarily due to an increase in checking and savings accounts. Stockholders' equity was $12,406,991 on December 31, 1998, compared to $13,477,572 on March 31, 1998. The change in stockholders' equity was the result of net earnings, which was offset by a reduction in deferred recognition and retention plan, an increase in unrealized loss on available-for-sale securities, net and the acquisition of 84,068 shares of treasury stock at an aggregate purchase price of $1,446,854 or $17.21 per share. 7 RESULTS OF OPERATIONS Net earnings for the Company's quarter ended December 31, 1998 were $399,842 compared to $219,426 for the comparable quarter in 1997. The increase in earnings was due to an increase in total non-interest income, primarily due to increased service charges and an increase in gains on sales of investment securities, mortgage-backed securities and loans. These increases were partially offset by an increase in total non-interest expense. Net interest income after provision for loan losses for the quarter ended December 31, 1998 was $699,691 compared to $732,838 for the quarter ended December 31, 1997, a decrease of $33,147. The decrease was a result of interest income increasing $116,047 from $2,101,561 in 1997 to $2,217,608 in 1998, while interest expense increased $154,488 from $1,344,629 in 1997 to $1,499,117 in 1998. The decrease in net interest income after provision for loan losses was a result of a decrease in rates received on interest earning assets, while the cost of interest bearing liabilities declined at a slower rate. Non-interest income increased from $126,769 for the quarter ended December 31, 1997 to $571,805 for the quarter ended December 31, 1998. The increase was due to an increase in fee income and an increase in gains on the sale of investments, mortgage-backed securities and loans. Fee income increased as a result of a significant increase in transaction accounts, and gains were realized on the sale of a portion of the Bank's long term, fixed rate investments and loans. The Company's non-interest expense for the three months ended December 31, 1998 was $643,770 compared to $513,914 for the comparable quarter in 1997. The increase was due to an increase in compensation and benefits, occupancy and equipment expense and data processing expense related to the opening of the new branch office in Richmond. Income tax expense for three months ended December 31, 1998 was $227,884 compared to $126,267 for the similar period in 1997. The effective tax rates for the three months ended December 31, 1998 was 36.3% compared to 36.5% for the three months ended December 31, 1997. Net earnings for the nine months ended December 31, 1998, were $829,591 compared to $627,843 for the nine months ended December 31, 1997, an increase of $201,748. The increase is primarily due to increases in non-interest income, partially offset, by an increase in total non-interest expense. Net interest income after provision for loan losses for the nine month period ended December 31, 1998 was $2,216,823 compared to $2,180,556 for the nine month period ended December 31, 1997, an increase of $36,267. The increase was due to an increase in total interest earning assets, while the Bank's net interest margin declined. Non-interest income for the nine months ended December 31, 1998, was $956,296 compared to $319,834 for the nine month period a year earlier, an increase of $636,462. The increase was due to an increase in service charges and an increase in gains on the sale of investments, mortgage-backed securities and loans. The Company's non-interest expense for the nine months ended December 31, 1998 was $1,875,865, compared to $1,507,211 for the nine months ended December 31, 1997, an increase of $368,654. The increase was due to an increase in compensation and benefits, occupancy and equipment expense, data processing expense and other non-interest expense primarily related to the opening of a new branch office in Richmond, Missouri, on March 30, 1998, as well as marketing expenses related to the Bank's high performance checking account program. Income tax expense for the nine months ended December 31, 1998, was $467,663 compared to $365,336 for the similar period in 1997. The increase was due to an increase in earnings before taxes in 1998. The effective tax rates for the nine months ended December 31, 1998 was 36.1% compared to 36.8% for the nine months ended December 31, 1997. PROVISION FOR LOAN LOSSES The provision for loan losses is based on the periodic analysis of the loan portfolio by management. In establishing the provision, management considers numerous factors including general economic conditions, loan portfolio condition, prior loss experience, and independent analysis. The provision for loan losses for the three months ended December 31, 1998, was $18,800 and for the nine months ended December 31, 1998, was $50,000. Based upon the analysis of the addition to established allowances and the composition of the loan portfolio, management concluded that the allowance is adequate. While current economic conditions in the Bank's market are stable, future conditions will dictate the level of future allowances for losses on loans. 8 NON-PERFORMING ASSETS On December 31, 1998, non-performing assets were $200,565 compared to $231,577 on March 31, 1998. On December 31, 1998, the Bank's allowance for loan losses was $296,756, or 148% of non-performing assets compared to $247,710, or 107% on March 31, 1998. Loans are considered non-performing when the collection of principal and/or interest is not probable, or in the event payments are more than 90 days delinquent. The allowance for loan losses was .44% of total loans as of December 31, 1998 compared to .40% at March 31, 1998. CAPITAL RESOURCES The Bank is subject to three capital to asset requirements in accordance with Office of Thrift Supervision (OTS) regulations. The following table is a summary of the Bank's regulatory capital requirements versus actual capital as of December 31, 1998. Actual Required Excess Amount/Percent Amount/Percent Amount/Percent -------------- -------------- -------------- (Dollars in Thousands) Tangible Equity ......... $11,826/ 9.10% $2,602/2.00% $9,224/ 7.10% Core Leverage Capital ... $11,826/ 9.10% $5,205/4.00% $6,621/ 5.10% Risk-based Capital ...... $12,123/21.39% $4,422/8.00% $7,701/13.39% LIQUIDITY The Bank's principal sources of funds are deposits, principal and interest payments on loans, deposits in other insured institutions, and investment securities. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan payments are more influenced by interest rates, general economic conditions and competition. Additional sources of funds may be obtained from the Federal Home Loan Bank of Des Moines by utilizing numerous available products to meet funding needs. The Bank is required to maintain minimum levels of liquid assets as defined by regulations. The required percentage is currently four percent of net withdrawable savings deposits and borrowings payable on demand or in one year or less. The Bank has maintained its liquidity ratio at levels exceeding the minimum requirement. The eligible liquidity ratio at December 31, 1998 was 49.66%. In light of the competition for deposits, the Bank may utilize the funding sources of the Federal Home Loan Bank of Des Moines (FHLB) to meet loan demand in accordance with the Bank's growth plans. The wholesale funding sources may allow the Bank to obtain a lower cost of funding and create a more efficient liability match to the respective assets being funded. For purposes of the cash flows, all short-term investments with a maturity of three months or less at the date of purchase are considered cash equivalents. Cash and cash equivalents for the periods ended December 31, 1998 and 1997 were $5,363,601 and $7,205,037, respectively. The decrease was primarily due to a decrease in the sale of investment securities. Net cash provided by financing activities decreased from $10,845,058 for the nine months ended December 31, 1997 compared to $8,263,738 for the nine months ended December 31, 1998. RECENT ACCOUNTING DEVELOPMENTS The Financial Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, in June 1998. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999, however, the 9 Company has chosen to apply the provisions of the statement as of July 1, 1998. At the date of initial application, the Company transferred all of its held-to-maturity securities to the available-for-sale category. Accordingly, all unrealized holding gains or losses at the date of transfer were recognized in a separate component of stockholders' equity and other comprehensive income. YEAR 2000 COMPLIANCE The Company utilizes and is dependent upon data processing systems and software to conduct its business. The data processing systems and software include those developed and maintained by the Company's data processor and purchased software which is run on in-house computer networks. In 1997 the Company initiated a review and assessment of all hardware and software to confirm that it will function properly in the year 2000. The Company's data processor has announced the completion of all mainframe application and personal computer based enhancements required for Year 2000 processing and for testing. The Company is currently verifying the results of testing. The Company has incurred costs of approximately $7,000 for testing to date and anticipates only minimal additional costs. The data processor will conduct terminal/network connectivity testing with the Company in the first quarter of 1999. The Company has recently purchased Year 2000 compliant personal computers for the teller system in the current year at a cost of approximately $75,000. The equipment replaced obsolete teller equipment. The Company estimates the total remaining costs to ensure Year 2000 compliance to be approximately $10,000. The Company has reviewed the commercial loan portfolio and does not believe there is potential risk of repayment with any of the loans due to the failure of the businesses. The Company's estimate of Year 2000 project costs and dates set forth above by which certain phases of the project are expected to be completed are based on management's best current estimate. Actual results could differ from those estimated. The failure to correct material Year 2000 problems could result in an interruption in, or failure of, certain normal business activities or operations. Such failures could materially and adversely affect the Company's results of operations, liquidity and financial condition. Due to the uncertainty inherent in the Year 2000 problem, the Company, at this time, is unable to determine whether the consequences of Year 2000 failure will have a material impact on the Company's results of operations, liquidity and financial condition. The Company believes it will significantly reduce the possibility of significant interruptions or failures with the completion of the Year 2000 project as scheduled. Hardin Bancorp, Inc. continues to make progress toward Year 2000 compliance and has contingency plans, which include converting to another currently compliant platform of the present data processor or operating on a manual basis, should other third party vendors prove non-compliant. FORWARD LOOKING STATEMENT This Quarterly Report on Form 10-Q may contain certain forward-looking statements consisting of estimates with respect to the financial condition, results of operations and business of the Company that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values and competition; changes in accounting principles, policies or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, pricing, products and services. 10 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 ----------------- As of December 31, 1998, the Company held 318,508 shares of its common stock as treasury stock at an aggregate purchase price of $4,684,001. On December 17, 1998 the Board of Directors declared a $.16 per share cash dividend to all stockholders of record on January 8, 1999, payable on January 22, 1999. Item 6. Exhibits and Reports on Form 8-K -------------------------------- Exhibits: 27 - Financial Data Schedule Reports on Form 8-K: None. 11 SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HARDIN BANCORP, INC. Registrant Date: February 16, 1999 /s/ Robert W. King ----------------- ------------------ Robert W. King, President and Chief Executive Officer (Duly Authorized Officer) Date: February 16, 1999 /s/ Karen K. Blankenship ----------------- ------------------------ Karen K. Blankenship, Senior Vice President and Secretary (Principal Accounting Officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 9-MOS MAR-31-1999 DEC-31-1998 955 4,409 0 0 52,700 0 0 67,353 297 130,113 81,560 35,000 1,146 0 0 0 11 12,396 130,113 4,026 2,399 308 6,733 2,943 4,466 2,267 50 450 1,876 1,297 1,297 0 0 830 1.12 1.07 6.89 201 0 0 389 248 50 0 298 196 0 102
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