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 ------- ---------- (State or other jurisdiction of (I.R. S. Employer Identification No.) incorporation or organization) 515 FRANKLIN SQUARE, MICHIGAN CITY, INDIANA 46360 - ------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (219) 879-0211 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 MARCH 31, 2001 ------- --------------
2 HORIZON BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollar Amounts in Thousands) <TABLE> <CAPTION> MARCH 31, DECEMBER 31, 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> ASSETS Cash and due from banks $ 14,957 $ 34,018 Interest-bearing demand deposits 1,007 1,033 Federal Fund Sold 6,700 ---------------------------------- 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 ---------------------------------- Total assets $516,210 $531,776 ================================== LIABILITIES Deposits Noninterest bearing $ 36,206 $ 30,044 Interest bearing 366,191 356,304 ---------------------------------- 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 ---------------------------------- Total liabilities 483,475 500,152 ---------------------------------- COMMITMENTS AND CONTINGENCIES EQUITY RECEIVED FROM CONTRIBUTIONS AND DIVIDENDS TO THE ESOP 6,654 6,676 ---------------------------------- 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) ---------------------------------- Total stockholders' equity 26,081 24,948 ---------------------------------- Total liabilities and stockholders' equity $516,210 $531,776 ================================== </TABLE> See notes to consolidated financial statements
3 HORIZON BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (Dollar Amounts in Thousands, Except Per Share Data) <TABLE> <CAPTION> THREE MONTHS ENDED MARCH 31 ---------------------------------- 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> INTEREST INCOME Loans receivable $ 9,245 $ 8,685 Investment securities: Taxable 1,250 1,208 Tax exempt 6 3 ---------------------------------- Total interest income 10,501 9,896 ---------------------------------- 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 ---------------------------------- Total interest expense 6,012 5,442 ---------------------------------- NET INTEREST INCOME 4,489 4,454 Provision for loan losses 352 503 ---------------------------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,137 3,951 ---------------------------------- 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 ---------------------------------- Total other income 2,299 1,624 ---------------------------------- 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 ---------------------------------- Total other expenses 4,907 4,286 ---------------------------------- INCOME BEFORE INCOME TAX 1,529 1,289 Income tax expense 591 507 ---------------------------------- NET INCOME $ 938 $ 782 =================================== BASIC AND DILUTED EARNINGS PER SHARE $ 1.42 $ 1.13 =================================== </TABLE> See notes to consolidated financial statements.
4 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, 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 ========================= ======================================================= </TABLE> See notes to consolidated financial statements.
5 HORIZON BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Dollar Amounts in Thousands) <TABLE> <CAPTION> THREE MONTHS ENDED MARCH 31 ---------------------------------- 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> 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 ---------------------------------- Net cash provided by operating activities 2,787 7,510 ---------------------------------- 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) ---------------------------------- Net cash provided (used) by investing activities 2,165 (5,594) ---------------------------------- 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 </TABLE> 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 <TABLE> <CAPTION> 2001 ---------------------------------------------------------------------- GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR MARCH 31 COST GAINS LOSSES VALUE - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> 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 ----------------- ---------------- ----------------- ----------------- Total available for sale $63,543 $1,000 $(138) $64,405 ================= ================ ================= ================= </TABLE>
7 HORIZON BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Table Dollar Amounts in Thousands) <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 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 ================================================================ </TABLE> 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. <TABLE> <CAPTION> AVAILABLE FOR SALE ----------------------------------- AMORTIZED FAIR COST VALUE - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> 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 =================================== </TABLE> 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 <TABLE> <CAPTION> MARCH 31, December 31, 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> 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 ==================================== </TABLE> NOTE 4 -- ALLOWANCE FOR LOAN LOSSES <TABLE> <CAPTION> MARCH 31, December 31, 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> 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 ==================================== </TABLE> NOTE 5 -- NONPERFORMING ASSETS <TABLE> <CAPTION> MARCH 31, December 31 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Nonperforming loans $2,505 $2,370 Other real estate owned 211 136 ------------------------------------ Total nonperforming assets $2,716 $2,506 ==================================== </TABLE>
9 HORIZON BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Table Dollar Amounts in Thousands) NOTE 6 -- OTHER COMPREHENSIVE INCOME <TABLE> <CAPTION> THREE MONTHS ENDED MARCH 31 2001 - ---------------------------------------------------------------------------------------------------------- <S> <C> 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 ============ </TABLE>
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 - ---------------------- ------------------------------------- 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