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 ------- ---------- (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 ------- -------------
2 HORIZON BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollar Amounts in Thousands) <TABLE> <CAPTION> JUNE 30, DECEMBER 31, 2001 2000 - ----------------------------------------------------------------------------------------------- <S> <C> <C> 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 ========================= </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 SIX MONTHS ENDED JUNE 30 JUNE 30 -------------------------------------------------- 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> 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 ================================================== </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 $ 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 ========================= ====================================================== </TABLE> See notes to consolidated financial statements.
5 HORIZON BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Dollar Amounts in Thousands) <TABLE> <CAPTION> SIX MONTHS ENDED JUNE 30 ---------------------------- 2001 2000 - ------------------------------------------------------------------------------------------------------------------- <S> <C> <C> 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 </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) 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 <TABLE> <CAPTION> 2001 ------------------------------------------------------------------ GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR JUNE 30 COST GAINS LOSSES VALUE - ------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> 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 ================================================================== </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 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. <TABLE> <CAPTION> AVAILABLE FOR SALE ----------------------------------- AMORTIZED FAIR COST VALUE - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> 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 =================================== </TABLE> 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 <TABLE> <CAPTION> JUNE 30, December 31, 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> 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 ==================================== </TABLE> Note 4 -- ALLOWANCE FOR LOAN LOSSES <TABLE> <CAPTION> JUNE 30, December 31, 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> 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 ==================================== </TABLE> Note 5 -- NONPERFORMING ASSETS <TABLE> <CAPTION> JUNE 30, December 31 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> Nonperforming loans $2,361 $2,370 Other real estate owned 452 136 ------------------------------------ Total nonperforming assets $2,813 $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> SIX MONTHS ENDED JUNE 30 2001 - ------------------------------------------------------------------------------------------------------- <S> <C> 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 ============== </TABLE>
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