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 ------------------ ------- HORIZON BANCORP --------------- (Exact name of registrant as specified in its charter) INDIANA 35-1562417 ------- ---------- (State or other jurisdiction of incorporation (I.R.S. Employer 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: 1,985,700 at NOVEMBER 5, 2001 --------- ----------------
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HORIZON BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollar Amounts in Thousands) <TABLE> <CAPTION> SEPTEMBER 30, December 31, 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> ASSETS Cash and due from banks $ 20,459 $ 34,018 Interest-bearing demand deposits 4,610 1,033 Federal funds sold 4,000 ---------------------------------------------- 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 ---------------------------------------------- Total assets $516,927 $531,776 ============================================== LIABILITIES Deposits Noninterest bearing $ 41,538 $ 30,044 Interest bearing 337,208 356,304 ---------------------------------------------- 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 ---------------------------------------------- Total liabilities 482,071 500,152 ---------------------------------------------- COMMITMENTS AND CONTINGENCIES EQUITY RECEIVED FROM STOCK BONUS PLAN 5,003 6,676 ---------------------------------------------- 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) ---------------------------------------------- Total stockholders' equity 29,853 24,948 ---------------------------------------------- Total liabilities and stockholders' equity $516,927 $531,776 ============================================== </TABLE> See notes to consolidated financial statements.
HORIZON BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollar Amounts in Thousands, Except Per Share Data) <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------------------------------------------------ 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> 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 ------------------------------------------------------------------ Total interest income 9,850 10,899 30,794 31,082 ------------------------------------------------------------------ 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 ------------------------------------------------------------------ Total interest expense 4,972 6,174 16,529 17,069 ------------------------------------------------------------------ NET INTEREST INCOME 4,878 4,725 14,265 14,013 Provision for loan losses 300 503 1,005 1,508 ------------------------------------------------------------------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,578 4,222 13,260 12,505 ------------------------------------------------------------------ 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 ------------------------------------------------------------------ Total other income 2,252 1,819 6,905 5,278 ------------------------------------------------------------------ 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 ------------------------------------------------------------------ Total other expenses 4,975 4,473 15,059 13,193 ------------------------------------------------------------------ INCOME BEFORE INCOME TAX 1,855 1,568 5,106 4,590 Income tax expense 731 355 1,991 1,538 ------------------------------------------------------------------ NET INCOME $1,124 $1,213 $3,115 $3,052 ================================================================== BASIC AND DILUTED EARNINGS PER SHARE $ .57 $ .59 $ 1.57 $ 1.48 ================================================================== </TABLE> See notes to consolidated financial statements.
HORIZON BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Table Dollar Amounts in Thousands) <TABLE> <CAPTION> ADDITIONAL ACCUMULATED OTHER COMMON PAID-IN COMPREHENSIVE RETAINED COMPREHENSIVE TREASURY STOCK CAPITAL INCOME EARNINGS INCOME STOCK TOTAL - ------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> <C> 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 ========================== ========================================================= </TABLE> See notes to consolidated financial statements.
HORIZON BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar Amounts in Thousands) <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30 ------------------------------ 2001 2000 - ------------------------------------------------------------------------------------------------------- <S> <C> <C> 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 ------------------------------------- Net cash provided by operating activities 5,092 29,749 ------------------------------------- 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) ------------------------------------- Net cash provided (used) by investing activities 8,916 (32,127) ------------------------------------- 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) ------------------------------------- Net cash provided (used) by financing activities (19,990) 3,578 ------------------------------------- NET CHANGE IN CASH AND CASH EQUIVALENTS (5,982) 1,200 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 35,051 34,844 ------------------------------------- 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 </TABLE> 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 <TABLE> <CAPTION> 2001 ----------------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR SEPTEMBER 30 COST GAINS LOSSES VALUE - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> 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 ----------------------------------------------------------------------- Total available for sale $47,071 $1,791 $24 $48,838 ======================================================================= </TABLE>
HORIZON BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Table Dollar Amounts in Thousands) NOTE 2 - INVESTMENT SECURITIES <TABLE> <CAPTION> 2000 ----------------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR DECEMBER 31 COST GAINS LOSSES VALUE - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> 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 ----------------------------------------------------------------------- Total investment securities $71,358 $571 $(554) $71,375 ======================================================================= </TABLE> 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. <TABLE> <CAPTION> AVAILABLE FOR SALE -------------------------------- AMORTIZED FAIR COST VALUE - ----------------------------------------------------------------------------- <S> <C> <C> 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 -------------------------------- 13,974 14,506 Mortgage-backed securities 15,331 15,743 Collateralized mortgage obligations 17,766 18,589 -------------------------------- $47,071 $48,838 ================================ </TABLE> 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 <TABLE> <CAPTION> SEPTEMBER 30, December 31, 2001 2000 - ----------------------------------------------------------------------------------------------- <S> <C> <C> 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 ----------------------------------------- Total loans $408,185 $393,578 ========================================= </TABLE> NOTE 4 - ALLOWANCE FOR LOAN LOSSES <TABLE> <CAPTION> SEPTEMBER 30, December 31, 2001 2000 - ----------------------------------------------------------------------------------------------- <S> <C> <C> 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 ========================================= </TABLE> NOTE 5 - NONPERFORMING ASSETS <TABLE> <CAPTION> SEPTEMBER 30, December 31, 2001 2000 - ----------------------------------------------------------------------------------------------- <S> <C> <C> Nonperforming loans $2,006 $2,370 Other real estate owned 214 136 ----------------------------------------- Total nonperforming assets $2,220 $2,506 ========================================= </TABLE>
HORIZON BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (Table Dollar Amounts in Thousands) NOTE 6 - OTHER COMPREHENSIVE INCOME <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30 2001 - ----------------------------------------------------------------------------------------------------------------- <S> <C> 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 ==================== </TABLE> 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 - ------------------ ----------------------------------------- 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