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 SEPTEMBER 30, 2001 commission file number 0-10792
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HORIZON BANCORP
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(Exact name of registrant as specified in its charter)
INDIANA 35-1562417
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
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
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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:
1,985,700 at NOVEMBER 5, 2001
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar Amounts in Thousands)
SEPTEMBER 30, December 31,
2001 2000
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ASSETS
Cash and due from banks $ 20,459 $ 34,018
Interest-bearing demand deposits 4,610 1,033
Federal funds sold 4,000
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Cash and cash equivalents 29,069 35,051
Interest-bearing deposits 245 238
Investment securities, available for sale 48,838 71,375
Loans held for sale 5,031 4,176
Loans, net of allowance for loan losses of $5,358 and $4,803 402,827 388,775
Premises and equipment 16,528 17,281
Federal Reserve and Federal Home Loan Bank stock 6,240 6,239
Interest receivable 2,879 3,301
Other assets 5,270 5,340
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Total assets $516,927 $531,776
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LIABILITIES
Deposits
Noninterest bearing $ 41,538 $ 30,044
Interest bearing 337,208 356,304
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Total deposits 378,746 386,348
Short-term borrowings 17,716 34,148
Federal Home Loan Bank advances 80,293 75,320
Interest payable 1,025 1,015
Other liabilities 4,291 3,321
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Total liabilities 482,071 500,152
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COMMITMENTS AND CONTINGENCIES
EQUITY RECEIVED FROM STOCK BONUS PLAN 5,003 6,676
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STOCKHOLDERS' EQUITY
Common stock, $.33 1/3 stated value
Authorized, 15,000,000 and 5,000,000 shares Issued, 3,115,284 shares, less
Stock Bonus Plan shares of
408,417 and 394,956 902 907
Additional paid-in capital 15,941 14,263
Retained earnings 27,417 25,184
Accumulated other comprehensive income 1,055 9
Less treasury stock, at cost, 360,423 and 350,293 shares (15,462) (15,415)
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Total stockholders' equity 29,853 24,948
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Total liabilities and stockholders' equity $516,927 $531,776
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See notes to consolidated financial statements.
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollar Amounts in Thousands, Except Per Share Data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
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2001 2000 2001 2000
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INTEREST INCOME
Loans receivable $8,796 $ 9,641 $ 27,334 $ 27,392
Investment securities:
Taxable 1,048 1,255 3,441 3,682
Tax exempt 6 3 19 8
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Total interest income 9,850 10,899 30,794 31,082
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INTEREST EXPENSE
Deposits 3,705 4,706 12,898 12,667
Federal funds purchased and short-term borrowings 45 144 261 473
Federal Home Loan Bank advances 1,222 1,324 3,370 3,929
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Total interest expense 4,972 6,174 16,529 17,069
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NET INTEREST INCOME 4,878 4,725 14,265 14,013
Provision for loan losses 300 503 1,005 1,508
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
4,578 4,222 13,260 12,505
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OTHER INCOME
Service charges on deposit accounts 569 534 1,632 1,517
Fiduciary activities 591 671 2,035 2,048
Commission income from insurance agency 190 216 659 619
Income from reinsurance company 21 27 64 87
Gain on sale of loans 581 127 1,639 297
Wire transfer fee income 129 114 388 381
Other income 171 130 488 329
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Total other income 2,252 1,819 6,905 5,278
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OTHER EXPENSES
Salaries and employee benefits 2,740 2,279 8,296 6,672
Net occupancy expenses 433 441 1,322 1,330
Data processing and equipment expenses 539 527 1,615 1,586
Other expenses 1,263 1,226 3,826 3,605
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Total other expenses 4,975 4,473 15,059 13,193
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INCOME BEFORE INCOME TAX 1,855 1,568 5,106 4,590
Income tax expense 731 355 1,991 1,538
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NET INCOME $1,124 $1,213 $3,115 $3,052
==================================================================
BASIC AND DILUTED EARNINGS PER SHARE $ .57 $ .59 $ 1.57 $ 1.48
==================================================================
See notes to consolidated financial statements.
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
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BALANCES, JANUARY 1, 2001 $907 $14,263 $25,184 $ 9 $(15,415) $24,948
Net income $3,115 3,115 3,115
Other comprehensive
income, net of tax,
unrealized gain on
securities
1,046 1,046 1,046
--------------------
Comprehensive income
$4,161
====================
Cash dividends ($.45
per share)
(882) (882)
Purchase of 2,853
shares of treasury
stock
(47) (47)
Market value change in
Stock Bonus Plan
shares subject to
put, net of
purchases and
distributions (5) 1,678 1,673
-------------------------- ---------------------------------------------------------
BALANCES, SEPTEMBER 30, 2001
$902 $15,941 $27,417 $1,055 $(15,462) $29,853
========================== =========================================================
See notes to consolidated financial statements.
HORIZON BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in Thousands)
NINE MONTHS
ENDED SEPTEMBER 30
------------------------------
2001 2000
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OPERATING ACTIVITIES
Net income $ 3,115 $ 3,052
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 1,005 1,508
Depreciation and amortization 1,105 1,085
Deferred income tax (396) (888)
Investment securities amortization, net 4 76
Gain on sale of loans (1,639) (297)
Proceeds from sales of loans 100,969 24,475
Loans originated for sale (100,185)
Deferred loan fees (27) (42)
Unearned income (23) (163)
Net change in:
Interest receivable 422 (232)
Interest payable 10 442
Other assets (238) 14
Other liabilities 970 719
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Net cash provided by operating activities 5,092 29,749
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INVESTING ACTIVITIES
Net change in interest-bearing deposits (7) (4)
Purchases of securities available for sale (1,995) (7,908)
Proceeds from maturities, calls, and principal repayments
of securities available for sale 25,964 9,794
Proceeds from sales of securities available for sale 315
Purchase of Federal Home Loan Bank and Federal Reserve Bank stock (1) (341)
Net change in loans (15,276) (33,710)
Recoveries on loans previously charged-off 268 268
Purchases of premises and equipment (352) (226)
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Net cash provided (used) by investing activities 8,916 (32,127)
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FINANCING ACTIVITIES
Net change in
Deposits (7,602) 52,387
Short-term borrowings (16,432) (17,743)
Federal Home Loan Bank advances 140,000 85,320
Repayment of Federal Home Loan Bank advances (135,027) (115,000)
Re-issuance of treasury stock 60
Dividends paid (882) (929)
Purchase of treasury stock (47) (517)
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Net cash provided (used) by financing activities (19,990) 3,578
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NET CHANGE IN CASH AND CASH EQUIVALENTS (5,982) 1,200
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 35,051 34,844
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 29,069 $ 36,044
=====================================
ADDITIONAL CASH FLOWS INFORMATION
Interest paid $ 16,519 $ 17,511
Income tax paid 2,456 1,780
See notes to consolidated financial statements.
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 periods ended September 30, 2001 and September 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 September 30, 2001 and its results of operations and cash
flows for the periods presented.
Basic earnings per share is computed by dividing net income by the
weighted-average number of shares outstanding. All share and per share amounts
have been adjusted to give effect to a three for one stock split declared on
October 16, 2001.
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
SEPTEMBER 30 COST GAINS LOSSES VALUE
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Available for sale
U. S. Treasury and federal agencies $8,437 $128 $17 $8,548
State and municipal 5,537 421 5,958
FHLMC mortgage-backed securities 4,518 142 1 4,659
FNMA mortgage-backed securities 10,813 271 11,084
GNMA collateralized mortgage obligation 8,007 219 8,226
FHLMC collateralized mortgage obligation 7,734 534 8,268
FNMA collateralized mortgage obligation 2,025 76 6 2,095
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Total available for sale $47,071 $1,791 $24 $48,838
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HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Table Dollar Amounts in Thousands)
NOTE 2 - INVESTMENT SECURITIES
2000
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GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31 COST GAINS LOSSES VALUE
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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 collateralized 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 September
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
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AMORTIZED FAIR
COST VALUE
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Within one year $3,039 $3,098
One to five years 3,970 4,198
Five to ten years 4,832 5,065
After ten years 2,133 2,145
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13,974 14,506
Mortgage-backed securities 15,331 15,743
Collateralized mortgage obligations 17,766 18,589
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$47,071 $48,838
================================
Proceeds from sales of securities available for sale during the nine months
ended September 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 months ended September 30, 2001. There were no sales of
securities available for sale during the three and nine months ended September
30, 2000.
HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Table Dollar Amounts in Thousands)
NOTE 3 - LOANS
SEPTEMBER 30, December 31,
2001 2000
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Commercial loans $ 94,168 $ 88,421
Mortgage warehouse loans 151,189 102,884
Real estate loans 80,865 125,431
Installment loans 81,963 76,842
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Total loans $408,185 $393,578
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NOTE 4 - ALLOWANCE FOR LOAN LOSSES
SEPTEMBER 30, December 31,
2001 2000
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Allowance for loan losses
Balances, beginning of period $4,803 $3,273
Provision for losses, operations 1,005 2,010
Recoveries on loans 268 334
Loans charged off (718) (814)
-----------------------------------------
Balances, end of period $5,358 $4,803
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NOTE 5 - NONPERFORMING ASSETS
SEPTEMBER 30, December 31,
2001 2000
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Nonperforming loans $2,006 $2,370
Other real estate owned 214 136
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Total nonperforming assets $2,220 $2,506
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HORIZON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Table Dollar Amounts in Thousands)
NOTE 6 - OTHER COMPREHENSIVE INCOME
NINE MONTHS ENDED SEPTEMBER 30 2001
- -----------------------------------------------------------------------------------------------------------------
Unrealized gains on securities:
Unrealized holding gains arising during the period $1,750
Less: reclassification adjustment for gains (losses) realized in net income
--------------------
Net unrealized gains 1,750
Tax expense (704)
--------------------
Other comprehensive income $1,046
====================
NOTE 7 - THREE FOR ONE STOCK SPLIT
On October 16, 2001 the Board of Directors of Horizon authorized a three for one
stock split, payable on or about November 16, 2001, to shareholders of record as
of the close of business on October 31, 2001. All share and per share amounts
have been adjusted for the split.
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
HORIZON BANCORP AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
INTRODUCTION
The purpose of this discussion is to focus on Horizon's financial condition and
its 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 repayments, 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, 2001, cash and cash equivalents decreased by
approximately $6.0 million. In addition to liquidity provided from the normal
operating, funding, and investing activities of Horizon, at September 30, 2001,
the Bank has available approximately $38.0 million in unused credit lines with
various money center banks and the FHLB.
There have been no other material changes in the liquidity of Horizon from
December 31, 2000 to September 30, 2001.
Capital Resources
- -----------------
The capital resources of Horizon and the Bank exceed regulatory capital ratios
for "well capitalized" banks at September 30, 2001. Stockholders' equity totaled
$34.9 million ($5 million from Stock Bonus Plan) as of September 30, 2001
compared to $31.6 million ($6.7 million from Stock Bonus Plan) as of December
31, 2000. The change in stockholders' equity during the nine months ended
September 30, 2001 is the result of an increase in market value of investment
securities available for sale, net of tax, and net income, net of dividends
declared. At September 30, 2001, the ratio of stockholders' equity to assets was
6.74% compared to 5.95% at December 31, 2000.
On October 16, 2001 the Board of Directors of Horizon authorized a three for one
stock split, payable on or about November 16, 2001, to shareholders of record as
of the close of business on October 31, 2001.
There have been no other material changes in Horizon's capital resources from
December 31, 2000 to September 30, 2001.
Material Changes in Financial Condition - September 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 nine months of 2001, deposits decreased over $7.6 million,
primarily as a result of decreased negotiable Certificates of Deposit from
municipalities. The Bank sold nearly $35 million of residential mortgage loans
from its loan portfolio and approximately $23 million of U.S. Government Agency
securities matured. These moneys were used to fund growth in consumer loans and
mortgage warehouse loans. 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 September 30, 2001.
RESULTS OF OPERATIONS
Material changes in results of operations - September 30, 2001 compared to
- --------------------------------------------------------------------------
September 30, 2000
- ------------------
During the nine months ended September 30, 2001, net income totaled $3.115
million or $1.57 per share compared to $3.052 million or $1.48 per share for the
same period in 2000. Per share information has been adjusted to reflect a three
for one stock split declared October 16, 2001.
Net interest income was $14.265 million for the nine months ended September 30,
2001 compared to $14.013 million for the same period of 2000.
The provision for loan losses totaled $1.005 million for the nine months ended
September 30, 2001 compared to $1.508 million for the same period in 2000. The
decrease in the provision is primarily related to decreased loan delinquency and
nonperforming loans. The allowance for loan losses to total loans is 1.31% at
September 30, 2001 compared to 1.22% at December 31, 2000.
Total non-interest income for the nine months ended September 30, 2001 increased
$1.627 million or 30.83% from the same period in 2000. The primary reason for
the change was an increase in gains on sale of loans related to the above
mentioned sale of residential mortgage loans as well as increased gains from
sales of currently generated residential mortgage loans. The volume of new
residential mortgage loans has increased from the prior year due to lower
interest rates that have resulted in increased refinancing activity.
Noninterest expense increased $1.866 million or 14.14% for the nine months ended
September 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 nine months ending September 30, 2001 and 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Horizon currently does not engage in any derivative or hedging activity. Refer
to the Horizon's 2000 Form 10-K for analysis of its interest rate sensitivity.
Horizon believes there have been no significant changes in its interest rate
sensitivity since it was reported in its 2000 Form 10-K.
Forward-Looking Statements
- --------------------------
Certain statements in this Item 3 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 Horizon to differ materially from any future results,
performance, or achievements expressed or implied by such forward-looking
statements.
PART II - OTHER INFORMATION
HORIZON BANCORP AND SUBSIDIARIES
PART II - OTHER INFORMATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
ITEM 5. OTHER INFORMATION
On October 16, 2001, the Board of Directors of Horizon Bancorp approved an
amendment to Article III, Section 6 of Horizon's By-Laws to remove the
requirement that stock certificates contain original signatures. That Section
now provides that stock certificates may be signed either manually or by
facsimile.
On October 16, 2001, the Board of Directors of Horizon Bancorp approved an
amendment to Article V, Section 1 of Horizon's Articles of Incorporation to
increase the authorized shares of common stock from 5 million to 15 million in
connection with the 3 for 1 forward stock split. This amendment became effective
on October 31, 2001. Shareholder approval was not required for this amendment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. The following exhibits are filed herewith:
3.1 Amended and Restated Articles of Incorporation of the
Registrant as amended October 31, 2001.
3.2 Amended and Restated Bylaws of the Registrant as amended
October 16, 2001.
b. No reports on Form 8-K were filed during the three months ended
September 30, 2001.
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
11-6-01 /s/ Craig M. Dwight
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Date: BY: Craig M. Dwight
President and Chief Executive Officer
11-6-01 /s/ James H. Foglesong
- ------------------ -----------------------------------------
Date: BY: James H. Foglesong
Chief Financial Officer