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 June 30, 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
incorporation or organization) Identification No.)
515 FRANKLIN SQUARE, MICHIGAN CITY, INDIANA 46360
- ------------------------------------------- -----
(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
--- ---
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 JULY 31, 2001
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2
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollar Amounts in Thousands)
JUNE 30, DECEMBER 31,
2001 2000
- -----------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 44,823 $ 34,018
Interest-bearing demand deposits 844 1,033
-------------------------
Cash and cash equivalents 45,667 35,051
Interest-bearing deposits 245 238
Investment securities, available for sale 60,892 71,375
Loans held for sale 8,662 4,176
Loans, net of allowance for loan losses of $5,233 and $4,803 406,784 388,775
Premises and equipment 16,708 17,281
Federal Reserve and Federal Home Loan Bank stock 6,240 6,239
Interest receivable 3,089 3,301
Other assets 5,958 5,340
-------------------------
Total assets $ 554,245 $ 531,776
=========================
LIABILITIES
Deposits
Noninterest bearing $ 44,905 $ 30,044
Interest bearing 366,170 356,304
-------------------------
411,075 386,348
Short-term borrowings 24,964 34,148
Federal Home Loan Bank advances 80,293 75,320
Interest payable 1,032 1,015
Other liabilities 3,548 3,321
-------------------------
Total liabilities 520,912 500,152
=========================
COMMITMENTS AND CONTINGENCIES
EQUITY RECEIVED FROM STOCK BONUS PLAN 5,031 6,676
-------------------------
STOCKHOLDERS' EQUITY
Common stock, $1 stated value
Authorized, 5,000,000 shares
Issued, 1,038,428 shares, less Stock Bonus Plan shares of
136,890 and 131,652 902 907
Additional paid-in capital 15,913 14,263
Retained earnings 26,591 25,184
Accumulated other comprehensive income 358 9
Less treasury stock, at cost, 376,501 and 375,550 shares (15,462) (15,415)
-------------------------
Total stockholders' equity 28,302 24,948
-------------------------
Total liabilities and stockholders' equity $ 554,245 $ 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 SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------------------------------------
2001 2000 2001 2000
- --------------------------------------------------------------------------------------------------------
INTEREST INCOME
Loans receivable $ 9,293 $ 9,066 $18,538 $17,751
Investment securities:
Taxable 1,143 1,219 2,393 2,427
Tax exempt 7 2 13 5
--------------------------------------------------
Total interest income 10,443 10,287 20,944 20,183
--------------------------------------------------
INTEREST EXPENSE
Deposits 4,353 3,766 9,193 7,961
Federal funds purchased and short-term borrowings 95 222 216 329
Federal Home Loan Bank advances 1,097 1,465 2,148 2,605
--------------------------------------------------
Total interest expense 5,545 5,453 11,557 10,895
--------------------------------------------------
NET INTEREST INCOME 4,898 4,834 9,387 9,288
Provision for loan losses 353 502 705 1,005
--------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,545 4,332 8,682 8,283
--------------------------------------------------
OTHER INCOME
Service charges on deposit accounts 552 521 1,063 983
Fiduciary activities 701 710 1,444 1,377
Commission income from insurance agency 215 174 469 403
Income from reinsurance company 16 22 43 60
Gain on sale of loans 560 147 1,058 170
Other income 310 269 576 472
--------------------------------------------------
Total other income 2,354 1,843 4,653 3,465
--------------------------------------------------
OTHER EXPENSES
Salaries and employee benefits 2,823 2,138 5,556 4,393
Net occupancy expenses 424 443 889 889
Data processing and equipment expenses 559 545 1,076 1,059
Other expenses 1,371 1,308 2,563 2,379
--------------------------------------------------
Total other expenses 5,177 4,434 10,084 8,720
--------------------------------------------------
INCOME BEFORE INCOME TAX 1,722 1,741 3,251 3,028
Income tax expense 669 684 1,260 1,189
--------------------------------------------------
NET INCOME $ 1,053 $ 1,057 $ 1,991 $ 1,839
==================================================
BASIC AND DILUTED EARNINGS PER SHARE $ 1.59 $ 1.53 $ 3.01 $ 2.66
==================================================
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 $ 1,991 1,991 1,991
Other comprehensive
income, net of tax
Unrealized gains on
securities
349 349 349
--------------------
Comprehensive income $2,340
====================
Cash dividends ($.90 per
share)
(584 ) (584)
Purchase of 951 shares of
treasury stock
(47) (47)
Market value change in
Stock Bonus Plan shares
subject to put, net of
purchases and
distributions
(5) 1,650 1,645
------------------------- ------------------------------------------------------
BALANCES, JUNE 30, 2001 $902 $15,913 $26,591 $358 $(15,462) $28,302
========================= ======================================================
See notes to consolidated financial statements.
5
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollar Amounts in Thousands)
SIX MONTHS
ENDED JUNE 30
----------------------------
2001 2000
- -------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 1,991 $ 1,839
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 705 1,005
Depreciation and amortization 741 730
Deferred income tax (476) (167)
Investment securities amortization (accretion), net (5) 48
Gain on sale of loans (1,058) (170)
Proceeds from sales of loans 58,969 13,340
Loans originated for sale (62,397)
Deferred loan fees (23) (30)
Unearned income (23) (140)
Net change in
Interest receivable 212 (72)
Interest payable 17 82
Other assets (371) (350)
Other liabilities 227 96
----------------------------
Net cash provided by operating activities (1,491) 16,211
----------------------------
INVESTING ACTIVITIES
Net change in interest-bearing deposits (7) (5)
Purchases of securities available for sale (7,908)
Proceeds from maturities, calls, and principal repayments 10,750
of securities available for sale 7,947
Proceeds from sales of securities available for sale 315
Purchase of Federal Home Loan Bank or Federal Reserve Bank Stock (1) (341)
Net change in loans (18,882) (22,336)
Recoveries on loans previously charged-off 215 222
Purchases of premises and equipment (168) (64)
----------------------------
Net cash used by investing activities (7,778) (22,485)
----------------------------
FINANCING ACTIVITIES
Net change in
Deposits 24,727 10,869
Short-term borrowings (9,184) (9,800)
Federal Home Loan Bank advance 120,000 65,320
Repayment of Federal Home Loan Bank advance (115,027) (60,000)
Re-issuance of Treasury Stock 60
Dividends paid (584) (620)
Purchase of treasury stock (47) (167)
----------------------------
Net cash provided by financing activities 19,885 5,662
============================
NET CHANGE IN CASH AND CASH EQUIVALENT 10,616 (612)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 35,051 34,844
----------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 45,667 $ 34,232
============================
ADDITIONAL CASH FLOWS INFORMATION
Interest paid $ 11,540 $ 10,977
Income tax paid 1,780 1,230
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) and HBC Insurance Group, Inc. (Insurance Company) and The Loan Store,
Inc. All inter-company balances and transactions have been eliminated. The
results of operations for the period ended June 30, 2001 and June 30, 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 June 30, 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 principals 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
------------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
JUNE 30 COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------------------
Available for sale
U. S. Treasury and federal agencies $19,783 $ 66 $(101) $19,748
State and municipal 5,552 238 5,790
FHLMC mortgage-backed securities 4,841 72 (16) 4,897
FNMA mortgage-backed securities 11,246 150 11,396
GNMA collateralized mortgage obligation 8,013 (140) 7,873
FHLMC collateralized mortgage obligation 7,731 321 8,052
FNMA collateralized mortgage obligation 3,130 21 (15) 3,136
------------------------------------------------------------------
Total investment securities $60,296 $868 $(272) $60,892
==================================================================
7
HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
2000
-------------------------------------------------------------------
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
-------------------------------------------------------------------
Total investment securities $71,358 $571 $(554) $71,375
===================================================================
The amortized cost and fair value of securities available for sale at June 30,
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 $ 11,038 $ 11,098
One to five years 2,464 2,517
Five to ten years 9,699 9,883
After ten years 2,134 2,040
-----------------------------------
25,335 24,538
Mortgage-backed securities 16,087 16,293
Collateralized mortgage obligations 18,874 19,061
-----------------------------------
$60,296 $60,892
===================================
Proceeds from sales of securities available for sale during the three and six
months ended June 30, 2001 were $315 thousand. There were no gross gains or
losses realized on the sales. There were no sales of securities available for
sale during the three and six months ended June 30, 2000.
8
HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
Note 3 -- LOANS
JUNE 30, December 31,
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
Commercial loans $ 87,094 $ 88,421
Mortgage warehouse loans 164,059 102,884
Real estate loans 81,451 125,431
Installment loans 79,413 76,842
------------------------------------
Total loans $412,017 $393,578
====================================
Note 4 -- ALLOWANCE FOR LOAN LOSSES
JUNE 30, December 31,
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses
Balances, beginning of period $4,803 $3,273
Provision for losses, operations 705 2,010
Recoveries on loans 214 334
Loans charged off (489) (814)
------------------------------------
Balances, end of period $5,233 $4,803
====================================
Note 5 -- NONPERFORMING ASSETS
JUNE 30, December 31
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
Nonperforming loans $2,361 $2,370
Other real estate owned 452 136
------------------------------------
Total nonperforming assets $2,813 $2,506
====================================
9
HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Table Dollar Amounts in Thousands)
Note 6 -- OTHER COMPREHENSIVE INCOME
SIX MONTHS ENDED JUNE 30 2001
- -------------------------------------------------------------------------------------------------------
Unrealized gains on securities:
Unrealized holding gains arising during the period $579
Less: reclassification adjustment for gains realized in net income
--------------
Net unrealized gains 579
Tax expense (230)
--------------
Other comprehensive income $349
==============
10
HORIZON BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 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 six
months ended June 30, 2001, cash and cash equivalents increased by approximately
$11 million; primarily the result of large deposit activity on the last business
day of June. In addition to liquidity provided from the normal operating,
funding, and investing activities of Horizon, at June 30, 2001, the Bank has
available approximately $42 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 June 30, 2001.
Capital Resources
- -----------------
The capital resources of Horizon and Bank exceed regulatory capital ratios for
"well capitalized" banks at June 30, 2001. Stockholders' equity totaled $33.333
million ($5.031 million from Stock Bonus Plan) as of June 30, 2001 compared to
$31.624 million ($6.676 million from Stock Bonus Plan) as of December 31, 2000.
The change in stockholders' equity during the six months ended June 30, 2001 is
the result of an increase in the market value of investment securities available
for sale accounted for as an increase to stockholders' equity, net of tax, and
net income, net of dividends declared. At June 30, 2001, the ratio of
stockholders' equity to assets was 6.01% 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 June 30, 2001.
11
HORIZON BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
Material Changes in Financial Condition - June 30, 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 six months of 2001, nearly $35 million of seasoned residential
mortgage loans were sold. The proceeds were used to fund mortgage warehouse
loans that grew by approximately $61 million. Additionally, the growth was
funded by the increase in total deposits and a decline in investment securities
through maturities and payments on various mortgage backed securities. 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 June 30, 2001.
RESULTS OF OPERATIONS
Material Changes in Results of Operations - June 30, 2001 Compared to June 30,
- ------------------------------------------------------------------------------
2000
- ----
During the six months ended June 30, 2001, net income totaled $1.991 million or
$3.01 per share compared to $1.839 million or $2.66 per share for the same
period in 2000.
Net interest income was $9.387 million for the six months ended June 30, 2001
compared to $9.288 million for the same period 2000.
The provision for loan losses totaled $705 thousand for the six months ended
June 30, 2001 compared to $1.005 million 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 1.26% at June 30, 2001 compared to 1.22% at
December 31, 2000.
Total non-interest income for the six months ended June 30, 2001 increased
$1.188 million or 34.29% 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
currently generated residential mortgage loans. The volume of new residential
mortgage loans has increased dramatically from the prior year due to lower
interest rates leading to increased refinancing activity.
Non-interest expense increased $1.364 million or 15.64% for the six months ended
June 30, 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 the six months ending June 30, 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 JUNE 30, 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 SIX MONTHS ENDED JUNE 30, 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
June 30, 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
August 2, 2001 /s/ Craig M. Dwight
- ---------------------- --------------------------
Date: BY: Craig M. Dwight
President and Chief Executive Officer
August 2, 2001 /s/ James H. Foglesong
- ---------------------- --------------------------
Date: BY: James H. Foglesong
Chief Financial Officer