1
HORIZON BANCORP
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
450 5th Street N.W.
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended MARCH 31, 2001 commission file number 0-10792
HORIZON BANCORP
(Exact name of registrant as specified in its charter)
INDIANA 35-1562417
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(State or other jurisdiction of (I.R. S. Employer Identification No.)
incorporation or organization)
515 FRANKLIN SQUARE, MICHIGAN CITY, INDIANA 46360
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 879-0211
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of class)
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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
661,928 at MARCH 31, 2001
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2
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollar Amounts in Thousands)
MARCH 31, DECEMBER 31,
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 14,957 $ 34,018
Interest-bearing demand deposits 1,007 1,033
Federal Fund Sold 6,700
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Cash and cash equivalents 22,664 35,051
Interest-bearing deposits 242 238
Investment securities, available for sale 64,405 71,375
Loans held for sale 3,674 4,176
Loans, net of allowance for loan losses of $5,032 and $4,803 393,997 388,775
Premises and equipment 17,039 17,281
Federal Reserve and Federal Home Loan Bank stock 6,239 6,239
Interest receivable 2,825 3,301
Other assets 5,125 5,340
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Total assets $516,210 $531,776
==================================
LIABILITIES
Deposits
Noninterest bearing $ 36,206 $ 30,044
Interest bearing 366,191 356,304
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Total deposits 402,397 386,348
Short-term borrowings 16,093 34,148
Federal Home Loan Bank advances 60,320 75,320
Interest payable 1,286 1,015
Other liabilities 3,379 3,321
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Total liabilities 483,475 500,152
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COMMITMENTS AND CONTINGENCIES
EQUITY RECEIVED FROM CONTRIBUTIONS AND DIVIDENDS TO THE ESOP 6,654 6,676
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STOCKHOLDERS' EQUITY
Common stock, $1 stated value
Authorized, 5,000,000 shares
Issued, 1,038,428 shares, less ESOP shares of
130,701 and 131,652 907 907
Additional paid-in capital 14,285 14,263
Retained earnings 25,836 25,184
Accumulated other comprehensive income 515 9
Less treasury stock, at cost, 376,347 and 375,396 shares (15,462) (15,415)
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Total stockholders' equity 26,081 24,948
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Total liabilities and stockholders' equity $516,210 $531,776
==================================
See notes to consolidated financial statements
3
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Dollar Amounts in Thousands, Except Per Share Data)
THREE MONTHS ENDED
MARCH 31
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2001 2000
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INTEREST INCOME
Loans receivable $ 9,245 $ 8,685
Investment securities:
Taxable 1,250 1,208
Tax exempt 6 3
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Total interest income 10,501 9,896
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INTEREST EXPENSE
Deposits 4,840 4,195
Federal funds purchased and short-term borrowings 121 107
Federal Home Loan Bank advances 1,051 1,140
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Total interest expense 6,012 5,442
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NET INTEREST INCOME 4,489 4,454
Provision for loan losses 352 503
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,137 3,951
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OTHER INCOME
Service charges on deposit accounts 511 462
Fiduciary activities 743 667
Commission income from insurance agency 254 229
Income from reinsurance company 27 38
Gain on sale of loans 498 23
Other income 266 205
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Total other income 2,299 1,624
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OTHER EXPENSES
Salaries and employee benefits 2,733 2,255
Net occupancy expenses 465 446
Data processing and equipment expenses 517 514
Other expenses 1,192 1,071
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Total other expenses 4,907 4,286
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INCOME BEFORE INCOME TAX 1,529 1,289
Income tax expense 591 507
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NET INCOME $ 938 $ 782
===================================
BASIC AND DILUTED EARNINGS PER SHARE $ 1.42 $ 1.13
===================================
See notes to consolidated financial statements.
4
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Table Dollar Amounts in Thousands)
ADDITIONAL ACCUMULATED OTHER
COMMON PAID-IN COMPREHENSIVE RETAINED COMPREHENSIVE TREASURY
STOCK CAPITAL INCOME EARNINGS INCOME STOCK TOTAL
- -------------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 2000 $907 $14,263 $25,184 $ 9 $(15,415) $24,948
Net income $ 938 938 938
Other comprehensive
income, net of tax
Unrealized gains on
securities
506 506 506
--------------------
Comprehensive income $1,444
====================
Cash dividends ($.45 per
share)
(286) (286)
Purchase of 951 shares of
treasury stock
(47) (47)
Net purchases and
distributions with ESOP
22 22
------------------------- -------------------------------------------------------
BALANCES, MARCH 31, 2001 $907 $14,285 $25,836 $515 $(15,462) $26,081
========================= =======================================================
See notes to consolidated financial statements.
5
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollar Amounts in Thousands)
THREE MONTHS
ENDED MARCH 31
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2001 2000
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OPERATING ACTIVITIES
Net income $ 938 $ 782
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 352 503
Depreciation and amortization 369 368
Deferred income tax (566) (167)
Investment securities amortization, net 1 26
Gain on sale of loans (498) (23)
Proceeds from sales of loans 26,829 5,149
Loans originated for sale (25,829)
Deferred loan fees (21) (9)
Unearned income (35) (42)
Net change in
Interest receivable 476 196
Interest payable 271 364
Other assets 442 67
Other liabilities 58 296
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Net cash provided by operating activities 2,787 7,510
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INVESTING ACTIVITIES
Net change in interest-bearing deposits (4) (3)
Purchases of securities available for sale (5,000)
Proceeds from maturities, calls, and principal repayments
of securities available for sale 7,814 6,624
Net change in loans (5,564) (7,300)
Recoveries on loans previously charged-off 46 154
Purchases of premises and equipment (127) (69)
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Net cash provided (used) by investing activities 2,165 (5,594)
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FINANCING ACTIVITIES
Net change in
Deposits 16,049 15,116
Short-term borrowings (18,055) (10,000)
Federal Home Loan Bank advance 60,000 25,225
Repayment of Federal Home Loan Bank advance (75,000) (50,000)
Re-issuance of Treasury Stock 60
Dividends paid (286) (310)
Purchase of treasury stock (47) (7)
----------------------------------
Net cash used by financing activities (17,339) (19,916)
----------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENT (12,387) (18,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 35,051 34,844
----------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $22,664 $16,844
==================================
ADDITIONAL CASH FLOWS INFORMATION
Interest paid $ 5,741 $ 5,806
Income tax paid 230
See notes to consolidated financial statements.
6
HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Horizon Bancorp (Horizon) and its wholly-owned subsidiaries, Horizon Bank, N.A.
(Bank), HBC Insurance Group, Inc. (Insurance Company) and The Loan Store, Inc.
All intercompany balances and transactions have been eliminated. The results of
operations for the period ended March 31, 2001 and March 31, 2000 are not
necessarily indicative of the operating results for the full year of 2001 or
2000. These interim financial statements are prepared without audit and reflect
all adjustments (consisting of normal recurring adjustments) which, in the
opinion of management, are necessary to present fairly the consolidated position
of Horizon Bancorp at March 31, 2001 and its results of operations and cash
flows for the periods presented. The accompanying consolidated financial
statements do not purport to contain all the necessary financial disclosure
required by generally accepted accounting principles that might otherwise be
necessary in the circumstances and should be read in conjunction with the 2000
Horizon Bancorp consolidated financial statements and related notes thereto
included in its Annual Report for the year ended December 31, 2000.
NOTE 2 -- INVESTMENT SECURITIES
2001
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GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
MARCH 31 COST GAINS LOSSES VALUE
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Available for sale
U. S. Treasury and federal agencies $19,970 $ 103 $ (59) $20,014
State and municipal 5,550 220 5,770
FHLMC mortgage-backed securities 5,188 84 (4) 5,268
FNMA mortgage-backed securities 12,667 171 12,838
GNMA collateralized mortgage obligation 8,019 (73) 7,946
FHLMC collateralized mortgage obligation 7,728 341 8,069
FNMA collateralized mortgage obligation 4,106 49 (2) 4,153
Marketable equity securities 315 32 347
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Total available for sale $63,543 $1,000 $(138) $64,405
================= ================ ================= =================
7
HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
2000
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GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31 COST GAINS LOSSES VALUE
- -------------------------------------------------------------------------------------------------------------------------
Available for sale
U. S. Treasury and federal agencies $26,171 $ 35 $(204) $26,002
State and Municipal 5,564 134 (2) 5,696
FHLMC mortgage-backed securities 5,598 63 (16) 5,645
FNMA mortgage-backed securities 13,252 57 (20) 13,289
GNMA collateralized mortgage obligations 8,026 (238) 7,788
FHLMC collaterailzed mortgage obligation 7,725 227 7,952
FNMA collateralized mortgage obligations 4,707 55 4,762
Marketable equity securities 315 (74) 241
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Total investment securities $71,358 $571 $(554) $71,375
================================================================
The amortized cost and fair value of securities available for sale at March 31,
2001, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
AVAILABLE FOR SALE
-----------------------------------
AMORTIZED FAIR
COST VALUE
- ----------------------------------------------------------------------------------------------------------------------------
Within one year $ 8,983 $ 9,015
One to five years 4,555 4,642
Five to ten years 8,871 9,035
After ten years 3,111 3,091
-----------------------------------
25,520 25,783
Mortgage-backed securities 17,855 18,106
Collateralized mortgage obligations 19,853 20,169
Marketable equity securities 315 347
-----------------------------------
$63,543 $64,405
===================================
There were no sales of securities available for sale during the three months
ending March 31, 2001.
8
HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
NOTE 3 -- LOANS
MARCH 31, December 31,
2001 2000
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Commercial loans $ 85,769 $ 88,421
Mortgage warehouse loans 149,424 102,884
Real estate loans 86,507 125,431
Installment loans 77,329 76,842
------------------------------------
Total loans $399,029 $393,578
====================================
NOTE 4 -- ALLOWANCE FOR LOAN LOSSES
MARCH 31, December 31,
2001 2000
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Allowance for loan losses
Balances, beginning of period $4,803 $3,273
Provision for losses, operations 352 2,010
Recoveries on loans 47 334
Loans charged off (170) (814)
------------------------------------
Balances, end of period $5,032 $4,803
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NOTE 5 -- NONPERFORMING ASSETS
MARCH 31, December 31
2001 2000
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Nonperforming loans $2,505 $2,370
Other real estate owned 211 136
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Total nonperforming assets $2,716 $2,506
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9
HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
NOTE 6 -- OTHER COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31 2001
- ----------------------------------------------------------------------------------------------------------
Unrealized gains on securities:
Unrealized holding gains arising during the period $845
Less: reclassification adjustment for gains realized in net income
------------
Net unrealized gains 845
Tax expense (339)
------------
Other comprehensive income $506
============
10
HORIZON BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
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
three months ended March 31, 2001, cash and cash equivalents decreased by
approximately $12 million and were used to repay short term borrowings and
Federal Home Loan Bank advances. In addition to liquidity provided from the
normal operating, funding, and investing activities of Horizon, at March 31,
2001, Bank has available approximately $57 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, 2000 to March 31, 2001.
Capital Resources
- -----------------
The capital resources of Horizon and Bank exceed regulatory capital ratios for
"well capitalized" banks at March 31, 2001. Stockholders' equity totaled $32.735
million ($6.654 million from ESOP) as of March 31, 2001 compared to $31.624
million ($6.676 million from ESOP) as of December 31, 2000. The change in
stockholders' equity during the three months ended March 31, 2001 is the result
of an increase in the market value of investment securities available for sale
and net income, net of dividends declared. At March 31, 2001, the ratio of
stockholders' equity to assets was 6.34% compared to 5.95% at December 31, 2000.
There have been no other material changes in Horizon's capital resources from
December 31, 2000 to March 31, 2001.
11
HORIZON BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
Material Changes in Financial Condition - March 31, 2001 compared to December
- -----------------------------------------------------------------------------
31, 2000
- --------
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.
During the first quarter of 2001, nearly $35 million of seasoned residential
mortgage loans were sold. These funds were used to increase mortgage warehouse
loans that increased by approximately $47 million. This growth, as well as an
approximately $33 million reduction in short-term borrowings and Federal Home
Loan Bank advances, was funded by an increase in total deposits and cash which
became available for use in Horizon's Federal Reserve account. Horizon continues
to monitor funding sources to reduce the cost of funds and maintain adequate
liquidity.
There have been no other material changes in the financial condition of Horizon
from December 31, 2000 to March 31, 2001.
RESULTS OF OPERATIONS
Material Changes in Results of Operations - March 31, 2001 Compared to March 31,
- -------------------------------------------------------------------------------
2000
- ----
During the three months ended March 31, 2001, net income totaled $938 thousand
or $1.42 per share compared to $782 thousand or $1.13 per share for the same
period in 2000.
Net interest income was $4.489 million for the three months ended March 31, 2001
compared to $4.454 million for the same period 2000.
The provision for loan losses totaled $352 thousand for the three months ended
March 31, 2001 compared to $503 thousand for the same period in 2000. The
decrease in the provision is due to declines in delinquent loans. The allowance
for loan losses to total loans is 1.25% at March 31, 2001 compared to 1.22% at
December 31, 2000.
Total noninterest income for the three months ended March 31, 2001 increased
$675 thousand or 41.56% from the same period in 2000. The primary reason for the
change was an increase in gain on sale of loans related to the above mentioned
sale of residential mortgage loans as well as increased gains from the sale of
currently generated residential mortgage loans. The volume of residential
mortgage loans has increased significantly from the prior year due to lower
interest rates which has resulted in increased refinancing activity.
Noninterest expense increased $621 thousand or14.49% for the three months ended
March 31, 2001 compared to the same period in 2000. The increase relates
primarily to commissions paid to mortgage loan originators and staff additions.
There have been no other material changes in the results of operations of
Horizon for three months ending March 31, 2001 and 2000.
12
HORIZON BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
Forward-Looking Statements
- --------------------------
Certain statements in this section constitute forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results, performance, or
achievements of the Company to differ materially from any future results,
performance, or achievements expressed or implied by such forward-looking
statements.
13
HORIZON BANCORP AND SUBSIDIARIES
PART II - OTHER INFORMATION
FOR THE THREE MONTHS ENDED MARCH 31, 2001
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
See Management's Discussion and Analysis
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not Applicable
ITEM 5. OTHER INFORMATION
- --------------------------
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a. Financial Data Schedule
b. No reports on Form 8-K were filed during the three months ended
March 31, 2001.
14
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
May 11, 2001 /s/ Robert C. Dabagia
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Date: BY: Robert C. Dabagia
Chairman and Chief Executive Officer
May 11, 2001 /s/ James H. Foglesong
- ---------------------- -------------------------------------
Date: BY: James H. Foglesong
Chief Financial Officer