| UNITED STATES |
| SECURITIES AND EXCHANGE COMMISSION |
| Washington, D.C. 20549 |
| |
| FORM 8-K |
| |
| CURRENT REPORT |
| Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 |
| |
| |
Date of Report (Date of earliest event reported): July 22, 2008 |
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| HORIZON FINANCIAL CORP. |
| (Exact name of registrant as specified in its charter) |
| |
| Washington | 0-27062 | 91-1695422 |
| (State or other jurisdiction | (Commission | (IRS Employer |
| of incorporation) | File Number) | Identification No.) |
| |
| 1500 Cornwall Avenue, Bellingham, Washington | 98225 |
| (Address of principal executive offices) | (Zip Code) |
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Registrant’s telephone number (including area code): (360) 733-3050 |
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| |
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions. |
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□ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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□ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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□ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
□ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition
On July 22, 2008, Horizon Financial Corp. issued its earnings release for the quarter ended June 30, 2008. A copy of the earnings release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release of Horizon Financial Corp. dated July 22, 2008.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| | HORIZON FINANCIAL CORP. |
| | |
| | |
| | |
| Date: July 22, 2008 | By: /s/Richard P. Jacobson |
| | Richard P. Jacobson |
| | President and Chief Executive Officer |
Exhibit 99.1
| | | |
CONTACTS: Rich Jacobson, CEO V. Lawrence Evans, Chairman Dennis Joines, President & COO 360.733.3050 | | NEWS RELEASE |
| | | |
Horizon Financial Reports Profitable First Quarter of Fiscal 2009
BELLINGHAM, WA – July 22, 2008 – Horizon Financial Corp. (NASDAQ: HRZB) today reported a profitable first quarter of fiscal 2009 despite recording a $3 million provision for loan losses. Horizon reported earnings of $2.0 million or $0.17 per diluted share, for the quarter ended June 30, 2008, compared to earnings of $5.0 million, or $0.41 per diluted share for the comparable quarter in 2007 and earnings of $3.8 million, or $0.31 per diluted share for the immediate prior quarter of March 31, 2008.
“We are clearly seeing softening in the regional real estate market, particularly in Snohomish and Pierce Counties,” said Rich Jacobson, Horizon’s CEO. “Employment growth is continuing to slow from last year’s robust pace. Unemployment in Washington State remained low at 5.5% in June 2008 but higher than 4.2% a year ago. Bellingham’s unemployment was 5.6% up from 4.2% last year, Tacoma area unemployment was 6.5%, Mt. Vernon-Anacortes was 6.3% and Snohomish County was 4.5% in June.”
“While the overall trends in our markets have been down, home sales around Western Washington last month reached the highest level since August 2007 as market conditions continue to favor buyers, according to a new report from Northwest Multiple Listing Service,” Jacobson continued. “The NWMLS also indicated that prices in most counties were down compared to a year ago, but up slightly compared to May, and inventory showed signs of returning to a more balanced market in portions of the greater Puget Sound market.”
Dick Conway and Doug Pedersen, economists who follow the Puget Sound economy closely, are forecasting slowing growth in 2008. Conway forecasted the Puget Sound economy “will escape a recession, though not by much, according to our June forecast. The economy is likely to be tested later this year. The recessionary U.S. economy, rising food and energy prices, tight credit, and the housing downturn constitute a formidable force, one that could flatten job growth in the last two quarters of 2008.” The report continued: “While the leading indicator now stands at 1.13 (1987=1.00), 2.6 percent below the level of a year ago, the overall drop still falls well short of a recession signal.”
Conference Call Information
Management will host a conference call tomorrow, July 23, 2008, at 9:00 am PDT (12:00 pm EDT) to discuss the quarterly results. The live call can be accessed by dialing (303) 262-2137 or on the web at www.horizonbank.com. The replay, which will be available for a month beginning shortly after the call concludes, can be heard at (303) 590-3000 using access code 11116240# or on the web at www.horizonbank.com.
Balance Sheet Review
Total assets grew 11% to $1.45 billion at June 30, 2008, from $1.30 billion at June 30, 2007. Net loans increased 15% to $1.25 billion at the end of June 2008 compared to $1.08 billion a year earlier. The loan mix continues to reflect the business banking focus of the lending team, with commercial real estate loans representing 67% of net loans, commercial loans representing 16%, residential representing 12%, and consumer representing 5% of net loans, respectively. “Our goal over the next year is to shift our loan mix to increase commercial and industrial loans and reduce the concentration of commercial real estate loans. As our land development and construction portfolio matures, we will reduce our exposure in this sector. In the short-term, however, the construction and land development portfolio will likely continue to increase as we complete funding for most of these projects,” said Dennis Joines, President of Horizon Bank.
Nonperforming loans grew to $35.8 million, or 2.88% of net loans at June 30, 2008, from $11.6 million, or 0.97% of net loans at March 31, 2008, and $157,000, or 0.01% of net loans at June 30, 2007. The increase in nonperforming loans is due to a small number of residential construction projects in suburban markets to the north and south of Seattle. Other real estate owned increased to $2.8 million at June 30, 2008, compared to $655,000 at March 31, 2008 and $725,000 at June 30, 2007. These properties consist of three projects, including a commercial parcel of land in east Snohomish County, three completed homes in Snohomish County and a single family home in east Skagit County. Total
HRZB - Reports First Quarter Fiscal 2009 Profits
July 22, 2008
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nonperforming assets were $38.6 million, or 2.67% of total assets at June 30, 2008, up from $12.3 million, or 0.88% of total assets at March 31, 2008, and $882,000, or 0.07% of total assets at June 30, 2007.
Delinquencies, loans that are 30 to 89 days past due and still considered performing assets, declined in the first quarter of fiscal 2009 to $13.4 million from $30.6 million at March 31, 2008 and increased from $5.3 million at June 30, 2007.
The following table breaks out the loan portfolio and nonperforming assets by category.
| | | | | | % of | |
| Nonperforming Assets by Category | | Nonperforming | | | Nonperforming | |
| (dollars in 000s) | | Assets | | | Assets | |
| | | | | | | |
| 1-4 Family residential | | $ | 1,829 | | | | 5 | % |
| 1-4 Family construction | | | 373 | | | | 1 | % |
| Subtotal | | | 2,202 | | | | 6 | % |
| | | | | | | | | |
| Commercial land development | | | 11,031 | | | | 29 | % |
| Commercial construction (1) | | | 25,163 | | | | 65 | % |
| Multi family residential | | | - | | | | 0 | % |
| Commercial real estate | | | - | | | | 0 | % |
| Commercial loans | | | 82 | | | | 0 | % |
| Home equity secured | | | 100 | | | | 0 | % |
| Other consumer loans | | | 5 | | | | 0 | % |
| Subtotal | | | 36,381 | | | | 94 | % |
| Total nonperforming assets | | $ | 38,583 | | | | 100 | % |
(1) The commercial construction totals shown in the table above include $7.8 million in a condo construction project, with the majority of the remaining balance consisting of various 1-4 family speculative construction projects.
“The majority of our nonperforming assets are for construction projects in Snohomish and Pierce counties, two markets which appear to be overbuilt at this time,” Jacobson noted. “Our loan portfolio in the greater Bellingham area (Whatcom County) and greater Mt. Vernon area (Skagit County) continue to perform relatively well.”
| | | | | | % of | |
| Nonperforming Assets by Market | | Nonperforming | | | Nonperforming | |
| (dollars in 000s) | | Assets | | | Assets | |
| | | | | | | |
| Whatcom County | | $ | 9,022 | | | | 23 | % |
| Skagit County | | | 660 | | | | 2 | % |
| Snohomish County | | | 20,717 | | | | 54 | % |
| Pierce County | | | 8,184 | | | | 21 | % |
| Total nonperforming assets | | $ | 38,583 | | | | 100 | % |
The provision for loan losses was $3.0 million in the first quarter of fiscal 2009, $2.0 million in the immediate prior quarter ended March 31, 2008, and $400,000 in the first quarter of fiscal 2008. Horizon recorded net charge offs of $3.0 million for the quarter ended June 30, 2008, compared to $777,000 in the immediate prior quarter and $27,000 in the first quarter of fiscal 2008. The reserve for loan losses totaled $19.1 million at June 30, 2008, representing 1.54% of net loans receivable compared to $19.1 million, or 1.60% of net loans receivable at March 31, 2008 and $16.3 million, or 1.50% of net loans receivable at June 30, 2007.
Horizon elected to take profits from its investment securities portfolio in the first quarter, generating a net gain of $579,000, primarily from the sale of equity holdings, including shares of Freddie Mac common stock (NYSE: FRE) .. “We continue to hold approximately 19,800 common shares of Freddie Mac, and we do not hold any preferred shares of either Freddie Mac or Fannie Mae.”
Total deposits increased 11% to $1.10 billion during the quarter ended June 30, 2008, compared to $988.0 million for the comparable period in 2007. Transaction accounts totaled $353.0 million and accounted for 32% of total deposits at June
HRZB - Reports First Quarter Fiscal 2009 Profits
July 22, 2008
Page 3
30, 2008, compared to $389.0 million, or 39% of total deposits a year ago. Time deposits increased to $744.0 million during the current quarter compared to $599.0 million at June 30, 2007. Brokered certificates of deposit were $153.8 million, or 14% of total deposits at June 30, 2008. This continues to be a challenging environment for attracting core deposits. Our shift in focus to commercial and industrial lending and away from construction and development lending should assist us in attracting core deposits going forward.
At June 30, 2008, Horizon’s book value was $10.69 per share, compared to $10.31 per share a year earlier, and its tangible book value was $10.63 per share, up from $10.24 per share a year ago. Horizon remains well capitalized with a Tier 1 capital to average assets leverage ratio of 8.8%, which remains solidly above the regulatory threshold of 5% for a well capitalized rating, and well above the 4% threshold for adequately capitalized institutions. Horizon declared a cash dividend on June 26, 2008 of $0.135 per share which is payable on August 1, 2008 to shareholders of record on July 11, 2008. “Our dividend payments for the quarter totaled approximately $1.6 million on an equity base of $127.0 million,” noted Chairman V. Lawrence Evans. “While we are diligent in reviewing our dividend policy each quarter, we recognize that cash dividends are important to our shareholders. We do not, however, anticipate making further share repurchases in the near term, which will support our efforts to preserve our capital base.”
Review of Operations
For the first quarter of fiscal 2009, net revenues were $13.5 million, compared to $15.1 million for the comparable quarter in fiscal 2008. Interest income declined 14% to $21.4 million in the current quarter compared to $24.9 million for the three months ended June 30, 2007. Contributing to this decline was $750,000 in interest reversals related to the increase in non-accrual loans during the quarter ended June 30, 2008. Interest expense declined 11% in the current quarter to $10.2 million, from $11.5 million for the three months ended June 30, 2007.
Non-interest income increased 33% to $2.3 million in the first quarter of fiscal 2009, compared to $1.7 million in the first quarter of fiscal 2008. The increase is primarily a result of growth in service fee revenue and gains on sales of investment securities.
Non-interest expense increased 5% to $7.6 million in the first quarter of fiscal 2009, from $7.3 million in the first quarter of fiscal 2008. The increase reflects the overall growth of the Bank, including our new Puyallup retail office and home loan center, which opened last summer.
The net interest margin was 3.40% in the first quarter of fiscal 2009, a decrease of 44 basis points from 3.88% in the immediate prior quarter and down 121 basis points from 4.61% in the same period a year ago. The reversal of interest for non-accrual loans accounted for 23 basis points of the decline in the first quarter of fiscal 2009.
The yield on earning assets was 6.48% in the first quarter of fiscal 2009, a decrease from 7.36% in the preceding quarter and 8.53% in the first quarter of fiscal 2008. In the first quarter of fiscal 2009, the cost of interest-bearing liabilities was 3.18%, compared to 3.60% in the preceding quarter and 4.05% for first quarter of fiscal 2008.
The return on average equity was 6.32% in the first quarter of fiscal 2009, compared to 11.77% in the immediate prior quarter and 16.08% in first quarter of fiscal 2008. Return on average assets was 0.57% in the first quarter of fiscal 2009 compared to 1.08% for the preceding quarter and 1.56% in the first quarter of fiscal 2008.
Horizon Financial Corp. is a $1.45 billion, state-chartered bank holding company headquartered in Bellingham, Washington. Its primary subsidiary, Horizon Bank, is a state-chartered commercial bank that operates 19 full-service offices, four commercial loan centers and four real estate loan centers throughout Whatcom, Skagit, Snohomish and Pierce counties, Washington.
Safe Harbor Statement: Except for the historical information in this news release, the matters described herein are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs, results of examinations by our banking regulators, our ability to manage loan delinquency rates, the ability to successfully expand existing relationships, deposit pricing and the ability to gather low-cost deposits, success in new markets and expansion plans, expense management and the efficiency ratio, expanding or maintaining the net interest margin, interest rate risk, the local and national economic environment, and other risks and uncertainties discussed from time to time in Horizon Financial’s filings with the Securities and Exchange Commission (“SEC”). Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this release. Horizon undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Investors are encouraged to read the SEC report of Horizon, particularly its Form 10-K for the fiscal year ended March 31, 2008, for meaningful cautionary language discussion why actual results may vary from those anticipated by management.
Sources: The Puget Sound Economic Forecaster June 2008 www.economicforecaster.com; http://www.nwrealestate.com/nwrpub/common/news.cfm; http://www.workforceexplorer.com/admin/uploadedPublications/1885_laus_current.xls
HRZB - Reports First Quarter Fiscal 2009 Profits
July 22, 2008
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| CONSOLIDATED STATEMENTS OF INCOME | Quarter Ended | Three Month | Quarter Ended | One Year | Quarter Ended |
| (unaudited) (in 000s, except share data) | June 30, 2008 | Change | Mar 31, 2008 | Change | June 30, 2007 |
| Interest income: | | | | | | | |
| Interest on loans | $ | 20,446 | | -10% | $ 22,637 | -14% | $ 23,884 |
| Interest and dividends on securities | 961 | | 6% | 906 | -5% | 1,014 |
| Total interest income | | 21,407 | | -9% | 23,543 | -14% | 24,898 |
| | | | | | | | | |
| Interest expense: | | | | | | | |
| Interest on deposits | | 8,587 | | -7% | 9,215 | -9% | 9,466 |
| Interest on borrowings | | 1,593 | | -17% | 1,914 | -20% | 1,991 |
| Total interest expense | | 10,180 | | -9% | 11,129 | -11% | 11,457 |
| Net interest income | | 11,227 | | -10% | 12,414 | -16% | 13,441 |
| | | | | | | | | |
| Provision for loan losses | | 3,000 | | 50% | 2,000 | 650% | 400 |
| Net interest income after provision for loan losses | 8,227 | | -21% | 10,414 | -37% | 13,041 |
| | | | | | | | | |
| Non-interest income: | | | | | | | |
| Service fees | | 960 | | 6% | 909 | 9% | 881 |
| Net gain on sales of loans - servicing released | 204 | | 7% | 191 | -35% | 314 |
| Net gain on sales of loans - servicing retained | - | | -100% | 158 | -100% | 13 |
| Net gain on sales of investment securities | 579 | | 21% | 480 | N/A | - |
| Other | | | 516 | | 9% | 475 | 4% | 495 |
| Total non-interest income | | 2,259 | | 2% | 2,213 | 33% | 1,703 |
| | | | | | | | | |
| Non-interest expense: | | | | | | | |
| Compensation and employee benefits | 4,503 | | 14% | 3,962 | 9% | 4,132 |
| Building occupancy | | 1,126 | | -7% | 1,205 | 4% | 1,084 |
| Other expenses | | 1,493 | | 4% | 1,440 | -6% | 1,593 |
| Data processing | | 244 | | 0% | 244 | 1% | 241 |
| Advertising | | | 219 | | 10% | 200 | 7% | 205 |
| Total non-interest expense | 7,585 | | 8% | 7,051 | 5% | 7,255 |
| | | | | | | | | |
| Income before provision for income taxes | 2,901 | | -48% | 5,576 | -61% | 7,489 |
| Provision for income taxes | | 881 | | -51% | 1,804 | -64% | 2,473 |
| Net Income | | $ | 2,020 | | -46% | $ 3,772 | -60% | $ 5,016 |
| | | | | | | | | |
| Earnings per share : | | | | | | | |
| Basic earnings per share | $ | 0.17 | | -47% | $ 0.32 | -59% | $ 0.41 |
| Diluted earnings per share | $ | 0.17 | | -45% | $ 0.31 | -59% | $ 0.41 |
| | | | | | | | | |
| Weighted average shares outstanding: | | | | | | |
| Basic | | | 11,893,813 | | 0% | 11,943,021 | -3% | 12,227,372 |
| Common stock equivalents | | 71,965 | | -12% | 81,437 | -36% | 112,480 |
| Diluted | | | 11,965,778 | | 0% | 12,024,458 | -3% | 12,339,852 |
| | | | | | | | | |
HRZB - Reports First Quarter Fiscal 2009 Profits
July 22, 2008
Page 5
| CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | | | | | Three Month | | | | | | One Year | | | | |
| (unaudited) (in 000s, except share data) | | June 30, 2008 | | | Change | | | March 31, 2008 | | | Change | | | June 30, 2007 | |
| Assets: | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 24,095 | | | | 8 | % | | $ | 22,412 | | | | -31 | % | | $ | 35,000 | |
| Interest-bearing deposits | | | 2,831 | | | | -3 | % | | | 2,912 | | | | -67 | % | | | 8,665 | |
| Investment securities - available for sale | | | 39,050 | | | | -5 | % | | | 41,241 | | | | -28 | % | | | 54,041 | |
| Investment securities - held to maturity | | | - | | | | N/A | | | | - | | | | -100 | % | | | 370 | |
| Mortgage-backed securities - available for sale | | | 38,116 | | | | -3 | % | | | 39,100 | | | | 25 | % | | | 30,374 | |
| Mortgage-backed securities - held to maturity | | | 15 | | | | -50 | % | | | 30 | | | | -87 | % | | | 118 | |
| Federal Home Loan Bank stock | | | 10,015 | | | | 13 | % | | | 8,867 | | | | 38 | % | | | 7,247 | |
| Loans held for sale | | | 2,314 | | | | -12 | % | | | 2,644 | | | | -29 | % | | | 3,240 | |
| Gross loans receivable | | | 1,264,740 | | | | 4 | % | | | 1,210,592 | | | | 15 | % | | | 1,100,810 | |
| Reserve for loan losses | | | (19,149 | ) | | | 0 | % | | | (19,114 | ) | | | 18 | % | | | (16,262 | ) |
| Net loans receivable | | | 1,245,591 | | | | 5 | % | | | 1,191,478 | | | | 15 | % | | | 1,084,548 | |
| Investment in real estate in a joint venture | | | 17,704 | | | | 1 | % | | | 17,567 | | | | 2 | % | | | 17,302 | |
| Accrued interest and dividends receivable | | | 7,179 | | | | -9 | % | | | 7,916 | | | | 1 | % | | | 7,134 | |
| Property and equipment, net | | | 27,351 | | | | -2 | % | | | 27,778 | | | | -5 | % | | | 28,673 | |
| Net deferred income tax assets | | | 7,012 | | | | 12 | % | | | 6,253 | | | | 88 | % | | | 3,736 | |
| Other real estate owned | | | 2,764 | | | | 322 | % | | | 655 | | | | 281 | % | | | 725 | |
| Other assets | | | 23,614 | | | | 1 | % | | | 23,325 | | | | 6 | % | | | 22,368 | |
| Total assets | | $ | 1,447,651 | | | | 4 | % | | $ | 1,392,178 | | | | 11 | % | | $ | 1,303,541 | |
| | | | | | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | | | | | |
| Deposits | | $ | 1,096,754 | | | | 6 | % | | $ | 1,038,792 | | | | 11 | % | | $ | 987,704 | |
| Other borrowed funds | | | 192,987 | | | | 0 | % | | | 192,343 | | | | 23 | % | | | 157,100 | |
| Borrowing related to investment in real estate in a joint venture | | | 22,983 | | | | 2 | % | | | 22,448 | | | | 11 | % | | | 20,689 | |
| Accounts payable and other liabilities | | | 5,020 | | | | -13 | % | | | 5,746 | | | | -34 | % | | | 7,588 | |
| Advances by borrowers for taxes and insurance | | | 186 | | | | -55 | % | | | 414 | | | | -5 | % | | | 196 | |
| Deferred compensation | | | 1,917 | | | | -1 | % | | | 1,944 | | | | -4 | % | | | 2,001 | |
| Income tax payable | | | 374 | | | | -83 | % | | | 2,174 | | | | -86 | % | | | 2,628 | |
| Total liabilities | | $ | 1,320,221 | | | | 4 | % | | $ | 1,263,861 | | | | 12 | % | | $ | 1,177,906 | |
| | | | | | | | | | | | | | | | | | | | | |
| Stockholders' equity: | | | | | | | | | | | | | | | | | | | | |
| Serial preferred stock, $1.00 par value; 10,000,000 shares | | | | | | | | | | | | | | | | | | | | |
| authorized; none issued or outstanding | | | - | | | | | | | | - | | | | | | | | - | |
| Common stock, $1.00 par value; 30,000,000 shares authorized; | | | | | | | | | | | | | | | | | | | | |
| 11,917,113, 11,892,208, and 12,186,224 shares outstanding | | $ | 11,917 | | | | 0 | % | | $ | 11,892 | | | | -2 | % | | $ | 12,186 | |
| Additional paid-in capital | | | 50,706 | | | | 0 | % | | | 50,597 | | | | -1 | % | | | 51,283 | |
| Retained earnings | | | 64,318 | | | | 1 | % | | | 63,906 | | | | 9 | % | | | 58,850 | |
| Accumulated other comprehensive income | | | 489 | | | | -75 | % | | | 1,922 | | | | -85 | % | | | 3,316 | |
| Total stockholders' equity | | | 127,430 | | | | -1 | % | | | 128,317 | | | | 1 | % | | | 125,635 | |
| Total liabilities and stockholders' equity | | $ | 1,447,651 | | | | 4 | % | | $ | 1,392,178 | | | | 11 | % | | $ | 1,303,541 | |
| | | | | | | | | | | | | | | | | | | | | |
| Intangible assets: | | | | | | | | | | | | | | | | | | | | |
| Goodwill | | $ | 545 | | | | 0 | % | | $ | 545 | | | | 0 | % | | $ | 545 | |
| Mortgage servicing asset | | | 240 | | | | -6 | % | | | 254 | | | | -1 | % | | | 242 | |
| Total intangible assets | | $ | 785 | | | | -2 | % | | $ | 799 | | | | 0 | % | | $ | 787 | |
HRZB - Reports First Quarter Fiscal 2009 Profits
July 22, 2008
Page 6
LOANS (unaudited) (in 000s) | | June 30, 2008 | | | | | | March 31, 2008 | | | | | | June 30, 2007 | | | | |
| 1-4 Mortgage | | | | | | | | | | | | | | | | | | |
| 1-4 Family residential | | $ | 167,788 | | | | | | $ | 165,824 | | | | | | $ | 148,692 | | | | |
| 1-4 Family construction | | | 37,719 | | | | | | | 35,303 | | | | | | | 27,963 | | | | |
| Participations sold | | | (51,330 | ) | | | | | | (54,269 | ) | | | | | | (52,686 | ) | | | |
| Subtotal | | | 154,177 | | | | | | | 146,858 | | | | | | | 123,969 | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Commercial land development | | | 171,316 | | | | | | | 178,726 | | | | | | | 154,307 | | | | |
| Commercial construction | | | 334,380 | | | | | | | 307,809 | | | | | | | 268,327 | | | | |
| Multi family residential | | | 44,890 | | | | | | | 45,049 | | | | | | | 48,148 | | | | |
| Commercial real estate | | | 296,682 | | | | | | | 300,109 | | | | | | | 291,705 | | | | |
| Commercial loans | | | 201,381 | | | | | | | 177,685 | | | | | | | 164,405 | | | | |
| Home equity secured | | | 53,110 | | | | | | | 47,351 | | | | | | | 43,144 | | | | |
| Other consumer loans | | | 8,804 | | | | | | | 7,005 | | | | | | | 6,805 | | | | |
| Subtotal | | | 1,110,563 | | | | | | | 1,063,734 | | | | | | | 976,841 | | | | |
| Subtotal | | | 1,264,740 | | | | | | | 1,210,592 | | | | | | | 1,100,810 | | | | |
| Less: | | | | | | | | | | | | | | | | | | | | | |
| Reserve for loan losses | | | (19,149 | ) | | | | | | (19,114 | ) | | | | | | (16,262 | ) | | | |
| Net loans receivable | | $ | 1,245,591 | | | | | | $ | 1,191,478 | | | | | | $ | 1,084,548 | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Net residential loans | | $ | 152,880 | | | | 12 | % | | $ | 145,565 | | | | 12 | % | | $ | 122,950 | | | | 11 | % |
| Net commercial loans | | | 197,676 | | | | 16 | % | | | 174,263 | | | | 15 | % | | | 161,452 | | | | 15 | % |
| Net commercial real estate loans | | | 834,142 | | | | 67 | % | | | 818,215 | | | | 69 | % | | | 750,995 | | | | 69 | % |
| Net consumer loans | | | 60,893 | | | | 5 | % | | | 53,435 | | | | 4 | % | | | 49,151 | | | | 5 | % |
| | | $ | 1,245,591 | | | | 100 | % | | $ | 1,191,478 | | | | 100 | % | | $ | 1,084,548 | | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
DEPOSITS (unaudited) (in 000s) | | June 30, 2008 | | | | | | | March 31, 2008 | | | | | | | June 30, 2007 | | | | | |
| Demand Deposits | | | | | | | | | | | | | | | | | | | | | | | | |
| Savings | | $ | 17,660 | | | | 2 | % | | $ | 17,933 | | | | 2 | % | | $ | 19,665 | | | | 2 | % |
| Checking | | | 71,382 | | | | 6 | % | | | 72,434 | | | | 7 | % | | | 80,358 | | | | 8 | % |
| Checking - non interest bearing | | | 78,981 | | | | 7 | % | | | 70,438 | | | | 7 | % | | | 89,145 | | | | 9 | % |
| Money market | | | 184,925 | | | | 17 | % | | | 183,063 | | | | 17 | % | | | 199,656 | | | | 20 | % |
| Subtotal | | | 352,948 | | | | 32 | % | | | 343,868 | | | | 33 | % | | | 388,824 | | | | 39 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Certificates of Deposit | | | | | | | | | | | | | | | | | | | | | | | | |
| Under $100,000 | | | 289,183 | | | | 26 | % | | | 286,657 | | | | 27 | % | | | 282,726 | | | | 29 | % |
| $100,000 and above | | | 300,801 | | | | 28 | % | | | 287,281 | | | | 28 | % | | | 247,888 | | | | 25 | % |
| Brokered Certificates of Deposit | | | 153,822 | | | | 14 | % | | | 120,986 | | | | 12 | % | | | 68,266 | | | | 7 | % |
| Total Certificates of Deposit | | | 743,806 | | | | 68 | % | | | 694,924 | | | | 67 | % | | | 598,880 | | | | 61 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 1,096,754 | | | | 100 | % | | $ | 1,038,792 | | | | 100 | % | | $ | 987,704 | | | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| WEIGHTED AVERAGE INTEREST RATES: | | Quarter Ended | | | Quarter Ended | | | Quarter Ended | |
| (unaudited) | | June 30, 2008 | | | March 31, 2008 | | | June 30, 2007 | |
| Yield on loans | | | 6.64 | % | | | 7.60 | % | | | 8.88 | % |
| Yield on investments | | | 4.32 | % | | | 4.16 | % | | | 4.46 | % |
| Yield on interest-earning assets | | | 6.48 | % | | | 7.36 | % | | | 8.53 | % |
| | | | | | | | | | | | | |
| Cost of deposits | | | 3.25 | % | | | 3.61 | % | | | 3.90 | % |
| Cost of borrowings | | | 2.86 | % | | | 3.56 | % | | | 4.95 | % |
| Cost of interest-bearing liabilities | | | 3.18 | % | | | 3.60 | % | | | 4.05 | % |
| | | | | | | | | | | | | |
HRZB - Reports First Quarter Fiscal 2009 Profits
July 22, 2008
Page 7
| AVERAGE BALANCES | | Quarter Ended | | | Quarter Ended | | | Quarter Ended | |
| (unaudited) (in 000s) | | June 30, 2008 | | | March 31, 2008 | | | June 30, 2007 | |
| Loans | | $ | 1,231,792 | | | $ | 1,192,023 | | | $ | 1,076,239 | |
| Investments | | | 89,019 | | | | 87,138 | | | | 91,004 | |
| Total interest-earning assets | | | 1,320,811 | | | | 1,279,161 | | | | 1,167,243 | |
| | | | | | | | | | | | | |
| Deposits | | | 1,056,157 | | | | 1,020,979 | | | | 970,704 | |
| Borrowings | | | 222,470 | | | | 214,973 | | | | 160,819 | |
| Total interest-bearing liabilities | | $ | 1,278,627 | | | $ | 1,235,952 | | | $ | 1,131,523 | |
| | | | | | | | | | | | | |
| Average assets | | $ | 1,419,914 | | | $ | 1,391,746 | | | $ | 1,286,934 | |
| Average stockholders' equity | | $ | 127,873 | | | $ | 128,128 | | | $ | 124,744 | |
| CONSOLIDATED FINANCIAL RATIOS | | Quarter Ended | | Quarter Ended | | Quarter Ended |
| (unaudited) | | June 30, 2008 | | March 31, 2008 | | June 30, 2007 |
| Return on average assets | | | 0.57 | % | | | 1.08 | % | | | 1.56 | % |
| Return on average equity | | | 6.32 | % | | | 11.77 | % | | | 16.08 | % |
| Efficiency ratio | | | 56.25 | % | | | 48.21 | % | | | 47.91 | % |
| Net interest spread | | | 3.30 | % | | | 3.76 | % | | | 4.48 | % |
| Net interest margin | | | 3.40 | % | | | 3.88 | % | | | 4.61 | % |
| Equity-to-assets ratio | | | 8.80 | % | | | 9.22 | % | | | 9.64 | % |
| Equity-to-deposits ratio | | | 11.62 | % | | | 12.35 | % | | | 12.72 | % |
| Book value per share | | $ | 10.69 | | | $ | 10.79 | | | $ | 10.31 | |
| Tangible book value per share | | $ | 10.63 | | | $ | 10.72 | | | $ | 10.24 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| RESERVE FOR LOAN LOSSES | | Quarter Ended | | Quarter Ended | | Quarter Ended |
| (unaudited) (dollars in 000s) | | June 30, 2008 | | March 31, 2008 | | June 30, 2007 |
| Balance at beginning of period | | $ | 19,114 | | | $ | 17,891 | | | $ | 15,889 | |
| Provision for loan losses | | | 3,000 | | | | 2,000 | | | | 400 | |
| Charge offs - net of recoveries | | | (2,965 | ) | | | (777 | ) | | | (27 | ) |
| Balance at end of period | | $ | 19,149 | | | $ | 19,114 | | | $ | 16,262 | |
| Reserves/Net Loans Receivable | | | 1.54 | % | | | 1.60 | % | | | 1.50 | % |
| | | | | | | | | | | | | |
| NON-PERFORMING ASSETS | | | | | | | | | | | | |
| (unaudited) (dollars in 000s) | | June 30, 2008 | | March 31, 2008 | | June 30, 2007 |
| Accruing loans - 90 days past due | | $ | - | | | $ | - | | | $ | - | |
| Non-accrual loans | | | 35,819 | | | | 11,608 | | | | 157 | |
| Restructured loans | | | - | | | | - | | | | - | |
| Total non-performing loans | | $ | 35,819 | | | $ | 11,608 | | | $ | 157 | |
| Total non-performing loans/net loans | | | 2.88 | % | | | 0.97 | % | | | 0.01 | % |
| Real estate owned | | $ | 2,764 | | | $ | 655 | | | $ | 725 | |
| Total non-performing assets | | $ | 38,583 | | | $ | 12,263 | | | $ | 882 | |
| Total non-performing assets/total assets | | | 2.67 | % | | | 0.88 | % | | | 0.07 | % |
