1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q/A
(Amendment No. 1)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended SEPTEMBER 30, 1999
---------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from .................. to ..........................
Commission file number 0-10792
---------
HORIZON BANCORP
---------------
(Exact name of registrant as specified in its charter)
INDIANA 35-1562417
------- ----------
(State or other jurisdiction of (I.R. S. Employer Identification No.)
incorporation or organization)
515 FRANKLIN SQUARE, MICHIGAN CITY, INDIANA 46360
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 879-0211
----------------
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 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:
643,923 AT OCTOBER 31, 1999
---------------------------
1
2
HORIZON BANCORP AND SUBSIDIARIES
LIST OF ITEMS AMENDED
PART I
FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Consolidated Balance Sheets at September 30,
1999 and December 31, 1998 3
Consolidated Statement of Income for the three-month
period and nine-month period ended September 30, 1999
and September 30, 1998 4
Consolidated Statement of Stockholders' Equity for the
nine-month period ended September 30, 1999 6
Consolidated Statement of Cash Flows for the nine-month
period ended September 30, 1999 and 1998 7
Note 8 - ESOP to the Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
TEXT OF AMENDMENT
EXPLANATORY NOTE:
Each of the above listed Items is hereby amended by deleting the Item in its
entirety and replacing it with the Items attached hereto and filed herewith.
The purpose of this amendment is to amend the Company's 10Q for the period
September 30, 1999 (the "Original Filing") to reflect changes resulting from the
calculation of income tax expense relating to expense incurred during the
termination of the Horizon Bancorp Employees' Stock Ownership Plan ("ESOP").
In July 1999, the Board of Directors of Horizon Bancorp authorized the
termination of the ESOP. An additional expense related to the termination was
appropriately recorded in the 3rd quarter Form 10Q. Income tax expense was
calculated under the assumption that the entire termination expense was a
deductible expense. At the time of the Original Filing, the Company and its
auditors believed that this calculation was appropriate. Subsequent to the
filing of Horizon Bancorp's Form 10Q, it has been determined that a significant
portion of the termination expense is not a deductible expense for income tax
purposes.
As a result, income tax expense has been increased by $605 thousand and
therefore, net income from continuing operations has decreased to a loss of
$1,592 thousand or ($2.63) for the three-months ended September 30, 1999 and a
loss of $475 thousand or ($0.93) for the nine-months ended September 30, 1999
and stockholders equity decreased to $22.739 million at September 30, 1999.
Any item in the Original Filing not expressly changed hereby shall be as set
forth in the Original Filing. All information contained in this amendment and
the Original Filing is subject to updating and supplementing as provided in the
Company's periodic reports filed with the SEC subsequent to the date of such
reports.
2
3
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollar Amounts in Thousands)
SEPTEMBER 30, DECEMBER 31,
1999 1998
-----------------------------
ASSETS
Cash and due from banks $ 14,617 $ 12,771
Federal funds sold 18,500
Interest-bearing demand deposits 328 598
------------------------
Cash and cash equivalents 14,945 31,869
Interest-bearing deposits 229 225
Investment securities
Available for sale 69,787 54,612
Held to maturity (fair value of $0 and $12,090) 11,746
------------------------
Total investment securities 69,787 66,358
Loans held for sale
Loans, net of allowance for loan losses of $2,848 and $2,787 300,224 287,559
Premises and equipment 18,356 18,393
Federal Reserve and Federal Home Loan Bank stock 3,973 3,973
Interest receivable 2,366 2,249
Other assets 5,545 5,528
------------------------
Total assets $ 415,425 $ 416,154
========================
LIABILITIES
Deposits
Noninterest bearing $ 37,423 $ 58,658
Interest bearing 289,085 263,743
------------------------
Total deposits 326,508 322,401
Short-term borrowings 650 4,000
Federal Home Loan Bank advances 54,000 54,000
Interest payable 768 817
Other liabilities 5,486 3,050
------------------------
Total liabilities 387,412 384,268
------------------------
COMMITMENTS AND CONTINGENCIES
EQUITY RECEIVED FROM CONTRIBUTIONS AND
DIVIDENDS TO THE ESOP 5,274 4,418
------------------------
STOCKHOLDERS' EQUITY
Common stock, $1 stated value
Authorized -- 5,000,000 shares
Issued -- 1,038,428 shares, less ESOP shares of
277,678 and 292,960 760 741
Additional paid-in capital 9,105 8,834
Retained earnings 22,720 24,201
Accumulated other comprehensive income (863) 336
Less treasury stock, at cost, 230,843 and 183,048 shares (8,983) (6,644)
------------------------
Total stockholders' equity 22,739 27,468
========================
Total liabilities and stockholders' equity $ 415,425 $ 416,154
========================
See notes to consolidated financial statements
3
4
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Dollar Amounts in Thousands, Except Per Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1998
-------------------------------------------------
INTEREST INCOME
Loans receivable $ 6,254 $ 5,815 $ 18,371 $ 17,396
Investment securities:
Taxable 1,268 992 3,844 2,927
Tax exempt 3 115 164 334
-------------------------------------------------
Total interest income 7,525 6,922 22,379 20,657
-------------------------------------------------
INTEREST EXPENSE
Deposits 3,060 2,657 9,184 7,700
Federal funds purchased and short-
term borrowings 10 21 13 42
Federal Home Loan Bank advances 745 713 2,196 1,914
-------------------------------------------------
Total interest expense 3,815 3,391 11,393 9,656
-------------------------------------------------
NET INTEREST INCOME 3,710 3,531 10,986 11,001
Provision for loan losses 200 180 545 655
-------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 3,510 3,351 10,441 10,346
-------------------------------------------------
OTHER INCOME
Service charges on deposit accounts 523 581 1,537 1,711
Fiduciary activities 518 524 1,536 1,653
Commission income from insurance
agency 206 205 621 257
Income from reinsurance company 39 46 120 107
Gain on sale of securities 33 209
Other income 147 99 351 301
-------------------------------------------------
Total other income 1,466 1,455 4,374 4,029
-------------------------------------------------
OTHER EXPENSES
Salaries and employee benefits 2,279 2,175 6,664 6,237
ESOP termination expense 1,959 1,959
Net occupancy expenses 458 377 1,252 963
Data processing and equipment
expenses 517 481 1,545 1,567
Other expenses 1,223 1,156 3,236 3,297
-------------------------------------------------
Total other expenses 6,436 4,189 14,656 12,064
-------------------------------------------------
Income Before Income Tax (1,460) 617 159 2,311
Income tax expense 132 226 634 711
-------------------------------------------------
NET INCOME FROM CONTINUING
OPERATIONS $ (1,592) $ 391 $ (475) $ 1,600
4
5
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME - CONTINUED
(Dollar Amounts in Thousands, Except Per Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1998
---------------------------------------------
DISCONTINUED OPERATIONS
Loss from operation of discontinued
subsidiary (less tax benefit of $55 in
1999 and $81 in 1998) $ $ (22) $ (81) $ (87)
Loss on disposal of subsidiary, including
provision of $113 for operating losses
during phase-out period (less tax
benefit of $43 in 1999) (20) (70)
---------------------------------------------
Total loss from discontinued
operations (20) (22) (151) (87)
---------------------------------------------
NET INCOME (LOSS) $ (1,612) $ 369 $ (626) $ 1,513
=============================================
Basic and Diluted Earnings per Share
from continued operations $ (2.63) $ 0.56 $ .95 $ 2.30
Basic and Diluted Earnings per Share
from loss on discontinued operations (0.03) (0.03) (0.23) (0.13)
---------------------------------------------
BASIC AND DILUTED EARNINGS PER SHARE $ (2.66) $ 0.53 $ (1.18) $ 2.17
=============================================
See notes to consolidated financial statements.
5
6
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Table Dollar Amounts in Thousands)
Accumulated
Additional Other
Common Paid-in Comprehensive Retained Comprehensive Treasury
Stock Capital Income Earnings Income Stock Total
-----------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1998
$ 741 $ 8,834 $ 24,201 $ 336 $ (6,644) $ 27,468
Net income (Loss) $ (626) (626) (626)
Other comprehensive
income, net of tax
Unrealized losses on
securities, net of
reclassification
adjustment
(1,199) (1,199) (1,199)
--------
Comprehensive income
$ (1,825)
========
Cash dividends ($1.35 per
share) (855) (855)
Issuance of 4,000 shares of
common stock for
purchase of investment
management entity 4 196 200
Purchase of 47,795 shares of
treasury stock (2,339) (2,339)
Net purchases and
distributions with ESOP 15 75 90
-------------------- ------------------------------------------------
BALANCES, SEPTEMBER 30, 1999 $ 760 $ 9,105 $ 22,720 $ (863) $ (8,983) $ 22,739
==================== ================================================
6
7
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollar Amounts in Thousands)
Nine Months
Ended September
1999 1998
----------------------
OPERATING ACTIVITIES
Net income (loss) $ (626) $ 1,514
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Provision for loan losses 545 655
Provision for loan losses, discontinued operations 250 120
Additional paid-in capital from release of ESOP shares 304 (149)
Depreciation and amortization 1040 849
Deferred income tax (23) (368)
Investment securities amortization, net 142 163
Gain on sale of investment securities (176)
Loss on disposal of fixed assets 90 28
Loss on other real estate owned 40
Deferred loan fees (45) (55)
Unearned income 221 (88)
Net change in:
Interest receivable (117) 13
Interest payable (49) 104
Other assets 1,600 (405)
Other liabilities 2,436 (906)
----------------------
Net cash provided by operating activities 5,592 1,515
----------------------
INVESTING ACTIVITIES
Net change in interest-bearing deposits (4) (4)
Purchases of securities available for sale (35,250) (27,864)
Proceeds from maturities, calls, and principal repayments
of securities available for sale 16,342 13,469
Proceeds from sales of securities available for sale 11,562
Purchases of securities held to maturity (2,597)
Proceeds from maturities, calls, and principal repayments of
securities held to maturity 2,000 1,287
Net change in loans (19,012) (14,483)
Proceeds from sales of loans 5,087 2,481
Recoveries on loans previously charged-off 289 295
Purchases of premises and equipment (1,093) (1,582)
----------------------
Net cash used by investing activities (20,079) (28,998)
----------------------
FINANCING ACTIVITIES
Net change in
Deposits 4,107 24,566
Short-term borrowings (3,350) (8,450)
Federal Home Loan Bank advance 8,000
Dividends paid (855) (930)
Purchase of treasury stock (2,339) (1,617)
----------------------
Net cash provided (used) by financing activities (2,437) 21,569
----------------------
NET CHANGE IN CASH AND CASH EQUIVALENT (16,924) (5,914)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 31,869 20,358
----------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,945 $ 14,444
======================
ADDITIONAL CASH FLOWS INFORMATION
Interest paid $ 11,442 $ 9,928
Income tax paid 230 590
See notes to consolidated financial statements
7
8
HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
NOTE 8 - ESOP
On July 20, 1999, the Board of Directors of Horizon Bancorp authorized the
termination of the Horizon Bancorp Employee Stock Ownership Plan ("ESOP"). On
December 31, 1999 the debt owed by the ESOP was repaid with the proceeds from
the sale of a portion of the unallocated shares to Horizon Bancorp. The
remaining shares will be allocated to participants. The expense related to the
termination of the ESOP was recorded in the 3rd quarter and resulted in an
expense of $1.959 million. The expense recorded was based upon the price of
Horizon Bancorp stock. An independent valuation firm performed a valuation of
Horizon Stock and determined the market price of the stock as of December 31,
1999 was $44.00 per share. Upon the termination of the ESOP, the retirement
plans of Horizon Bancorp will own approximately 24% of the outstanding shares.
8
9
HORIZON BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
Item 2 - Introduction
The purpose of this discussion is to focus on Horizon's financial condition,
changes in financial condition and the results of operations in order to provide
a better understanding of the consolidated financial statements included
elsewhere herein. This discussion should be read in conjunction with the
consolidated financial statements and the related notes.
Financial Condition
- -------------------
Liquidity
- ---------
The Bank maintains a stable base of core deposits provided by long standing
relationships with consumers and local businesses. These deposits are the
principal source of liquidity for Horizon. Other sources of liquidity for
Horizon include earnings, loan repayment, investment security sales and
maturities, sale of real estate loans and borrowing relationships with
correspondent banks, including the Federal Home Loan Bank (FHLB). During the
nine months ended September 30, 1999, cash and cash equivalents decreased by
$16.9 million in order to fund growth in the loan portfolios and to acquire
additional investment securities. In addition to liquidity provided from the
normal operating, funding, and investing activities of Horizon, at September 30,
1999, Bank has available approximately $74.4 million in unused credit lines with
various money center banks including the FHLB.
There have been no other material changes in the liquidity of Horizon from
December 31, 1998 to September 30, 1999.
Capital Resources
- -----------------
The capital resources of Horizon and Bank remain strong and exceed regulatory
capital ratios for "well capitalized" banks at September 30, 1999. Stockholders'
equity totaled $28.013 million ($5.274 million from ESOP) as of September 30,
1999 compared to $31.886 million ($4.418 million from ESOP) as of December 31,
1998. The change in stockholders' equity during the nine months ended September
30, 1999 is the result of the decrease in the market value of investment
securities available for sale accounted for as an addition / reduction of
stockholders' equity, the repurchase of Horizon Bancorp stock and net income,
net of dividends paid. At September 30, 1999, the ratio of stockholders' equity
to assets was 6.74% compared to 7.66% at December 31, 1998.
Horizon has selectively purchased shares that became available in the market
from time to time. During the nine months ended September 30, 1999, management
purchased 47,795 shares at a cost of $2.339 million.
During the first quarter of 1999, the Bank's subsidiary, Horizon Trust &
Investment Management, N.A. purchased Financial Planning and Management
Corporation in exchange for 4,000 shares of Horizon Bancorp stock. The effect of
this purchase was an increase in capital of $200,000 and the recording of
associated goodwill.
There have been no other material changes in Horizon's capital resources from
December 31, 1998 to September 30, 1999.
9
10
HORIZON BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
Material Changes in Financial Condition - September 30, 1999 compared to
- ------------------------------------------------------------------------
December 31, 1998
- -----------------
Because of the nature of its activities, Horizon is subject to pending and
threatened legal actions that arise in the normal course of business. In
management's opinion, after consultation with counsel, none of the litigation to
which Horizon or any of its subsidiaries is a party will have a material effect
on the consolidated financial position or results of operations of Horizon.
At September 30, 1999 as compared with December 31, 1998 there is a change in
the deposit mix in which the noninterest-bearing deposits decreased $21 million
and the interest-bearing deposits increased $25.3 million. The two largest
contributing factors were the restructuring of the consumer checking account
product to include an interest-bearing feature at a nominal interest rate and
the introduction of a municipal NOW account for previously off-balance sheet
public fund investments.
There have been no other material changes in the financial condition of Horizon
from December 31, 1998 to September 30, 1999.
Results of Operations
- ---------------------
Material changes in results of operations - September 30, 1999 compared to
- --------------------------------------------------------------------------
September 30, 1998
- ------------------
During the nine months ended September 30, 1999, earnings totaled a negative
$626 thousand or a negative $1.18 per share compared to $1.513 million or $2.17
per share for the same period in 1998.
Net interest income was $10.986 million for the nine months ended September 30,
1999 compared to $11.001 million for the same period 1998.
Total noninterest income for the nine months ended September 30, 1999 increased
$345 thousand or 8.56% from the same period in 1998. The two largest components
of the change were the addition of commission income from the acquisition of an
insurance agency that was purchased as of April 1, 1998 and a gain on the sale
of investment securities of $209 thousand.
Noninterest expense increased $2.594 million or 21.50% to $14.657 million for
the nine months ended September 30, 1999 compared to the same period in 1998.
The largest component of the change is the benefit expense of $1.959 million
associated with the termination of the ESOP. Two other contributing factors are
an increase in salary and benefit expense associated with the insurance agency
acquisition as well as increased personnel to achieve the planned asset growth
of the Trust Company. The other factor is increased occupancy expenses related
to capital asset expenditures and leased property rentals.
10
11
HORIZON BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
Results of Operations (continued)
- ---------------------------------
At the April, 1999 meeting, the Board of Directors of Horizon Bancorp approved
discontinuing the operations of The Loan Store, Inc., a wholly owned subsidiary
of Horizon Bancorp. As of August 13, 1999 substantially all the assets of The
Loan Store were sold. At September 30, 1999 The Loan Store, Inc.'s total assets
were $147 thousand and the net loss is $151 thousand for the nine month period
ending September 30, 1999. As of December 31, 1998, The Loan Store had total
assets of $4.459 million.
On July 20, 1999, the Board of Directors of Horizon Bancorp authorized the
termination of the Horizon Bancorp Employee Stock Ownership Plan ("ESOP"). The
debt currently owed by the ESOP will be repaid with the proceeds from the sale
of a portion of the unallocated shares to Horizon Bancorp. All remaining shares
will be allocated to participants. The expense related to the termination of the
ESOP was recorded in the 3rd quarter and resulted in an expense of $1.959
million. The expense recorded was based upon the price of Horizon Bancorp stock.
An independent valuation firm performed a valuation of Horizon Stock and
determined the market price of the stock as of December 31, 1999 was $44.00 per
share. Upon the termination of the ESOP, the retirement plans of Horizon Bancorp
will own approximately 24% of the outstanding shares.
There have been no other material changes in the results of operations of
Horizon for nine months ending September 30, 1999 and 1998.
11
12
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 thereunto duly authorized.
HORIZON BANCORP
(Registrant)
1/14/2000 /s/ Robert C. Dabagia
- ---------------- -----------------------------------------------------
Date: BY: Robert C. Dabagia
Chairman and Chief Executive Officer
1/14/2000 /s/ Diana E. Taylor
- ---------------- -----------------------------------------------------
Date: BY: Diana E. Taylor
Senior Vice President and Chief Financial Officer
12