SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the quarterly period ended December 31, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from ______________ to _______________
Commission file number 0-27062
Horizon Financial Corp.
(Exact name of registrant as specified in its charter)
Chartered by the State of Washington
(State or other jurisdiction of incorporation or organization)
91-1695422
(IRS Employer Identification No.)
1500 Cornwall Avenue
Bellingham, Washington
(Address of principal executive offices)
98225
(Zip Code)
Registrant's telephone number including area code: (360) 733-3050
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
As of February 4, 1998, 7,456,451 common shares, $1.00 par value, were
outstanding.
<PAGE>
HORIZON FINANCIAL CORP.
INDEX PAGE
PART 1 FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Statements of Financial Condition 1
Consolidated Statements of Operations 2-3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flow 5-6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II OTHER INFORMATION
Item 1 Legal Proceedings 12
Item 2 Changes in Securities 12
Item 3 Defaults Upon Senior Securities 12
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information 12
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURES
<PAGE>
HORIZON FINANCIAL CORP.
Consolidated Statements of Financial Condition
Dec. 31, March 31,
1997 1997
(unaudited)
ASSETS:
Cash and Due from Banks $ 5,092,317 $ 4,416,862
Interest-Bearing Deposits 7,505,295 10,398,316
Investment Securities - Available
for Sale 36,403,465 26,238,895
Investment Securities-Held to Maturity 5,003,487 8,381,775
Mortgage-Backed Securities - Available
for Sale 25,365,518 35,229,087
Mortgage-Backed Securities - Held to
Maturity 16,413,933 19,690,598
Loans Receivable 425,087,043 399,078,123
Accrued Interest and Dividends
Receivable 3,560,285 3,545,380
Income Tax Receivable -0- 297,192
Property and Equipment, Net 6,065,490 6,130,683
Other Assets 2,270,495 1,934,428
Total Assets $532,767,328 $515,341,339
LIABILITIES:
Deposits $438,560,352 $424,811,286
Accounts Payable and Other
Liabilities 5,149,616 8,935,825
Advances by Borrowers for Taxes
and Insurance 463,529 898,950
Deferred Compensation 1,278,750 1,290,000
Net Deferred Income Tax Liabilities 1,947,612 896,264
Federal income Tax Payable 509,577 -0-
Total Liabilities 447,909,436 436,832,325
STOCKHOLDERS' EQUITY:
Serial Preferred Stock, $1.00 Par Value,
10,000,000 Shares Authorized;
None Issued or Outstanding
Common Stock, $1.00 Par Value,
30,000,000 Shares Authorized;
7,703,337 and 6,650,340 Issued
and Outstanding 7,703,337 6,650,340
Paid-in Capital 53,627,954 40,063,678
Retained Earnings 24,209,547 34,518,794
Net Unrealized Gain/(Loss) on Investments
Available for Sale 2,665,685 624,833
Debt Related to ESOP (450,000) (450,000)
Treasury Stock-249,090 and 216,600 Held (2,898,631) (2,898,631)
Total Stockholders' Equity 84,857,892 78,509,014
Total Liabilities and Stockholders'
Equity $532,767,328 $515,341,339
(See Notes to Financial Statements)
<PAGE>
HORIZON FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
3 Months Ended
Dec. 31
1997 1996
INTEREST INCOME:
Interest on Loans $ 8,885,534 $ 8,663,101
Interest and Dividends on Investment
and Mortgage-Backed Securities 1,486,292 1,215,518
Total Interest Income 10,371,826 9,878,619
INTEREST EXPENSE:
Interest on Deposits 5,679,271 5,267,939
Net Interest Income 4,692,555 4,610,680
Provision for Loan Losses -0- 60,400
Net Interest Income After
Provision for Loan Losses 4,692,555 4,550,280
NON-INTEREST INCOME:
Service Fees 284,359 306,701
Net Gain(Loss) on Sale of Investments
and Trading Securities (118,746) (32,704)
Other 68,896 81,016
Total Non-Interest Income 234,509 355,013
NON-INTEREST EXPENSE:
Compensation and Employee Benefits 981,902 991,479
Building Occupancy 284,616 276,527
FDIC Insurance 13,704 500
Data Processing 116,875 101,484
Advertising 94,097 77,165
Other Expenses 296,885 372,924
Total Non-Interest Expense 1,788,079 1,820,079
Income Before Provision for
Income Taxes 3,138,985 3,085,214
Provision for Income Taxes 1,065,245 1,042,909
Net Income 2,073,740 2,042,305
Earnings Per Share $.28 $.28*
* Restated for 15% stock dividend declared April 22, 1997.
(See Notes to Financial Statements)
<PAGE>
HORIZON FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
9 Months Ended
Dec. 31
1997 1996
INTEREST INCOME:
Interest on Loans $ 25,845,461 $ 25,400,782
Interest and Dividends on Investment
and Mortgage-Backed Securities 4,564,166 3,584,048
Total Interest Income 30,409,627 28,984,830
INTEREST EXPENSE:
Interest on Deposits 16,664,730 15,586,664
Net Interest Income 13,744,897 13,398,166
Provision for Loan Losses 180,000 170,400
Net Interest Income After
Provision for Loan Losses 13,564,897 13,227,766
NON-INTEREST INCOME:
Service Fees 859,398 799,058
Net Gain(Loss) on Sale of Investments
and Trading Securities 186,415 268,915
Other 192,509 196,508
Total Non-Interest Income 1,238,322 1,264,481
NON-INTEREST EXPENSE:
Compensation and Employee Benefits 2,995,387 3,238,380
Building Occupancy 845,166 835,170
FDIC Insurance 40,622 1,500
Data Processing 334,695 301,530
Advertising 302,016 257,002
Other Expenses 1,038,133 1,129,109
Total Non-Interest Expense 5,556,019 5,762,691
Income Before Provision for
Income Taxes 9,247,200 8,729,556
Provision for Income Taxes 3,134,341 2,953,093
Net Income 6,112,859 5,776,463
Earnings Per Share $.82 $.77*
* Restated for 15% stock dividend declared April 22, 1997.
(See Notes to Financial Statements)
<PAGE>
<TABLE>
HORIZON FINANCIAL CORP.
Consolidated Statements of Changes in Stockholder's Equity
9 Months Ended December 31, 1997 and 1996
(unaudited)
Net Unrealized
Common Stock Additional Gains(Losses) Debt
Number Paid-In Retained on Related Treasury
of Shares at Par Capital Earnings Securities to ESOP Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at 3/31/96 6,579,954 $6,579,954 $39,415,875 $31,548,712 $1,602,673 -0- -0- $79,147,214
Cash div on common stk
at $.65 per share (4,189,962) (4,189,962)
Stock opts exercised 31,903 31,903 224,369 256,272
DRIP 16,757 16,757 204,079 220,836
Net change in unrealized
gain/loss - AFS 198,447 198,447
ESOP loan (500,000) (500,000)
Treasury stock (2,898,631) (2,898,631)
Net income 5,776,463 5,776,463
Balance at 12/31/96 6,628,614 6,628,614 $39,844,323 $33,135,213 $1,801,120 $(500,000) $(2,898,631) 78,010,639
Balance at 3/31/97 6,650,340 6,650,340 40,063,678 34,518,794 624,833 (450,000) $(2,898,631) 78,509,014
Cash div on common
stock at $.32 per sh. (2,379,472) (2,379,472)
Stock opts. exercised 35,342 35,342 234,668 270,010
DRIP 19,703 19,703 293,860 313,563
Net change in unrealized
gain/loss - AFS 2,040,852 2,040,852
15% stock dividend 997,952 997,952 13,035,748 (14,033,700) -0-
Cash paid for
fractional shares (8,934) (8,934)
Net income 6,112,859 6,112,859
Balance at 12/31/97 7,703,337 7,703,337 $53,627,954 $24,209,547 $2,665,685 $(450,000) $(2,898,631) $84,857,892
(See Notes to Financial Statements)
</TABLE>
<PAGE>
HORIZON FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
9 Months Ended
Dec. 31,
1997 1996
Cash Flows from Operating Activities:
Net Income $ 6,112,859 $ 5,776,463
Adjustments to Reconcile Net Income
Provided by Operating Activities
Depreciation 333,984 333,710
Amortization and Deferrals, Net 16,497 (136,664)
Provision for Loan Losses 180,000 170,400
Changes in Assets and Liabilities:
Interest & Dividends Receivable (14,905) 135,105
Interest Payable (78,976) (37,519)
Federal Income Taxes Payable 806,769 -0-
Other Assets (336,067) (159,603)
Other Liabilities (4,153,904) 1,717,387
Income Tax Receivable -0- 368,093
Net Cash Flows from Operating Activities $ 2,866,257 $ 8,167,372
Cash Flows From Investing Activities:
Change in Interest-Bearing Deposits, Net $ 2,893,021 $ 5,212,977
Purchases of Investment Securities - AFS (18,826,702) (6,357,003)
Proceeds from Sales and Maturities of
Investment Securities - AFS 10,274,635 12,743,867
Purchases of Investment Securities - HTM -0- -0-
Proceeds from Maturities of Investment
Securities - HTM 3,378,288 4,998,906
Purchases of Mtge Backed Securities - HTM -0- -0-
Purchases of Mtge Backed Securities - AFS (10,356,359) (10,009,292)
Proceeds from Mat of Mtge Backed Sec - HTM 3,276,665 2,446,017
Proceeds from Mat of Mtge Backed Sec - AFS 21,699,625 322,529
Proceeds from Sale of Loans 24,760,566 8,092,748
Principal Payments on Loans 53,060,451 52,253,175
Originations and Purchases of Loans (104,026,434) (81,818,300)
Purchases of Bank Premises and
Equipment (268,791) (294,080)
Net Cash Flows From Investing Activities: $ (14,135,035) $(12,408,456)
(See Notes to Financial Statements)
<PAGE>
HORIZON FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
9 Months Ended
Dec. 31,
1997 1996
Cash Flows From Financing Activities:
Change in Checking and
Savings Accounts, Net (1,254,039) 9,708,966
Proceeds From Issuance of Time Deposits 119,928,577 111,535,112
Payments for Maturing Time Deposits (104,925,472) (106,671,811)
Common Stock Issued, Net 583,573 477,108
Cash Dividends Paid (2,388,406) (4,189,962)
Treasury Stock Purchased -0- (2,898,631)
Net Cash Flows from Financing
Activities 11,944,233 7,960,782
Net Change in Cash and Cash Equivalents 675,455 3,719,698
Cash and Cash Equivalents,
Beginning of Year 4,416,862 4,844,146
Cash and Cash Equivalents,
End of Year $5,092,317 $8,563,844
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash Paid During the Period for:
Interest Expense $16,743,706 $15,624,183
Income Taxes $ 2,335,000 $ 2,585,000
<PAGE>
HORIZON FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31, 1997
(unaudited)
NOTE A - Basis of Presentation
The unaudited consolidated financial statements have been prepared in
accordance with general accepted accounting principles for interim financial
information and with the instructions to the Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation are reflected in the interim financial statements. The results
of operations for the periods ended December 31, 1997 and 1996 are not
necessarily indicative of the operating results for the full year. The
March 31, 1997, consolidated statement of financial condition presented with
the interim financial statements was audited and received an unqualified
opinion. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Bank's annual report for
the year ended March 31, 1997.
On October 13, 1995, Horizon Bank, a savings bank, ("Bank") reorganized into
the holding company form of ownership ("Reorganization"), resulting in
the Registrant becoming the sole stockholder of the Bank. Each outstanding
share of common stock of the Bank and options to acquire shares of common
stock of the Bank, became outstanding shares of common stock of the
Registrant and options to acquire shares of common stock of the Registrant,
respectively, as a result of the Reorganization. The consolidated financial
statements for the three months and nine months ended December 31, 1997,
include the accounts of Horizon Financial Corp., the Bank and other sub-
sidiaries of the Bank. Significant intercompany balances and transactions
have been eliminated in consolidation.
Prior to Reorganization, Horizon Financial Corp. had no material assets or
liabilities and engaged in no business activity. Subsequent to the
acquisition of the bank, Horizon Financial Corp. has engaged in no
significant activity other than holding the stock of the Bank.
NOTE B - Net Income Per Share
Earnings per share for the three months ended December 31, 1997 and 1996 are
calculated on the basis of 7,445,497 and 7,407,869 weighted average shares
outstanding, respectively (restated to reflect a 15% stock dividend declared
April 22, 1997).
NOTE C - Reclassification
Certain reclassifications have been made to prior financial statements to
conform with current presentation. Such reclassifications have no effect on
net income.
<PAGE>
HORIZON FINANCIAL CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS
General
The Corporation was formed under Washington law on May 22, 1995, and became
the holding company of the Bank, effective October 13, 1995. As a bank
holding company, the Corporation has a number of additional options and
operating advantages over the Bank. these include, but are not limited to:
expanded business diversification options; flexibility in acquisitions; and
the ability to repurchase its own stock without incurring the adverse tax
consequences of recapturing portions of the Bank's bad debt reserve.
The Bank was organized in 1922 as a Washington state-chartered mutual savings
and loan association and converted to a federal mutual savings and loan
association in 1934. In 1979, the Bank converted to a Washington state-
chartered mutual savings bank, the deposits of which are insured by the
Federal Deposit Insurance Corporation ("FDIC"). On August 12, 1986, the Bank
then converted to a state-chartered stock savings bank. The primary business
of the Bank is to acquire funds in the form of savings deposits and to use
the funds to make loans secured by residential and commercial properties in
the Bank's primary market area. The Bank's operations are conducted through
twelve full-service office facilities, located in Whatcom, Skagit and
Snohomish counties in northwest Washington.
At its March 26, 1996, meeting, the Board of Directors authorized the
repurchase of up to 10% of the Corporation's outstanding common stock over a
24-month period. During the fiscal year ended March 31, 1997, the
Corporation repurchased 216,600 shares (249,090 shares on a restated basis)
of its common stock. No shares were repurchased during the nine months ended
December 31, 1997.
On April 22, 1997, the Corporation declared a 15% stock dividend. The
appropriate historical figures presented herein have been restated to
reflect this stock dividend.
Financial Condition
Total consolidated assets for the Corporation as of December 31, 1997, were
$532,767,328, an increase of 3.38% from the March 31, 1997 level of
$515,341,339. This increase in assets was due primarily to the growth in
loans receivable, which increased 6.52% to $425,087,043 at December 31, 1997,
from $399,078,123 at March 31, 1997.
Total liabilities increased 2.54% to $447,909,436 at December 31, 1997, from
$436,832,325 at March 31, 1997. The increase in liabilities was due
primarily to the growth in savings deposits, which increased 3.24% to
$438,560,352 from $424,811,286.
Total stockholders' equity increased 8.09% to $84,857,892 at December 31,
1997, from $78,509,014 at March 31, 1997.
<PAGE>
Liquidity and Capital Resources
The Bank maintains liquid assets in the form of cash and short-term
investments to provide a source to fund loans, savings withdrawals and other
short-term cash requirements. At December 31, 1997, the Bank had liquid assets
(cash and marketable securities with maturities of one year or less) with a
book value of $20,328,614.
As of December 31, 1997, the total book value of investments and mortgage-
backed securities was $79,147,487 compared to a market value of $83,516,016,
resulting in an unrealized gain of $4,368,529. On March 31, 1997, the book
value of investments and mortgage-backed securities was $88,593,639 compared
to a market value of $89,321,020, resulting in an unrealized gain of $727,381.
The primary reasons for this difference at December 31, 1997, compared to
March 31, 1997, was the overall lower level of interest rates which increased
the valuation of the Bank's investment portfolio, along with increases in the
value of the Bank's common stock holdings.
The Bank's primary sources of funds are cash flow from operations, which
consist primarily of mortgage loan repayments; deposit increases; loan sales;
and cash received from the maturity or sale of investment securities. These
funds are primarily used to originate mortgage loans on real estate.
The Bank's liquidity fluctuates with the supply of funds, and management
believes that the current level of liquidity is adequate at this time. If
additional liquidity is needed, the Bank's options include, but are not
necessarily limited to: (1) selling additional loans in the secondary market;
(2) reverse repurchase agreements; (3) accepting additional jumbo and/or
public funds deposits; or (4) accessing the discount window of the Federal
Reserve Bank of San Francisco. The Bank had no borrowings against any kind
of credit as of December 31, 1997.
Stockholders' equity to total assets was 15.93% as of December 31, 1997, well
in excess of the 5.0% minimum required by the FDIC in order to be considered
well capitalized.
Comparative Results of Operations
For the Three and Nine Months Ended
December 31, 1997 and 1996
Net Interest Income
Net interest income for the three months ended December 31, 1997, increased
1.78% to $4,692,555 from $4,610,680 in the same time period of the previous
year. While interest on loans for the quarter ended December 31, 1997, increased
only 2.57% to $8,885,534 from $8,663,101, interest and dividends on investments
and mortgage-backed securities increased 22.28% to $1,486,292 from $1,215,518
for the comparable quarter a year ago. This is primarily due to the growth in
the Bank's security portfolio between the two periods, while the Bank's loans
receivable did not experience the same relative year over year growth. This
difference is due in part to the mortgages the Bank securitized near the end
of fiscal 1997 (approximately $25 million), which shifted these interest-earning
assets from loans receivable into mortgage-backed securities.
<PAGE>
Total interest income increased 4.99% to $10,371,826 from $9,878,619. This
increase is primarily attributable to an overall increase in interest-earning
assets over the prior period. Total interest paid on deposits increased
7.81% to $5,679,271 from $5,267,939. This increase in interest expense is due
to the overall deposit growth of the Bank, along with increasing competition
facing the Bank in attracting deposits.
The weighted average yield on all earning assets for the quarter ended
December 31, 1997, decreased 7 basis points to 8.10% from 8.17% for the
quarter ended December 31, 1996. The weighted average yield on loans
decreased 3 basis points to 8.45% from 8.48%, and the weighted average yield on
investments increased 1 basis point to 6.44% from 6.43%.
The Bank's cost of funds for the quarter ended December 31, 1997, increased 9
basis points to 5.14% from 5.05% for the quarter ended December 31, 1996.
This increase, along with the decline in the yield on earning assets discussed
above, resulted in a decline of 16 basis points in the Bank's interest rate
spread, to 2.96% from 3.12% for the comparable quarter one year ago.
Net interest income for the three months ended December 31, 1997, after
provision for loan losses, increased 3.13% to $4,692,555 from $4,550,280. There
were no provisions for loan losses during the quarter ended December 31, 1997,
compared to $60,400 for the same period one year ago. The Bank had no loans
listed as over 90 days delinquent at December 31, 1997.
Net interest income for the nine-month period ended December 31, 1997,
increased 2.59% to $13,744,897 from $13,398,166 for the comparable period one
year ago. Total interest income increased 4.92% to $30,409,627 from $28,984,830
due primarily to the increase in the Bank's earning assets. Total interest
expense for the nine-month period increased 6.92% to $16,664,730 from
$15,586,664. As discussed above, this increase is due to the overall growth
of the Bank, along with increases in the Bank's cost of funds attributable to
the competition facing the Bank in attracting deposits. Net interest income
after provisions for loan losses increased 2.55% to $13,564,897 from
$13,227,766.
Non Interest Income
Non interest income for the three months ended December 31, 1997, decreased
33.94% to $234,509 from $355,013 for the same time period a year ago. Service
fee income decreased 7.28% to $284,359 from $306,701. While servicing fees on
loans sold, appraisal fees, and escrow fees all showed increases during the
quarter ended December 31, 1997, there was a large prepayment penalty received
during the quarter ended December 31, 1996, which inflated the numbers for that
period. The net gain/loss on the sale of investment securities showed a loss
of $118,746 during the quarter, compared to a loss of $32,704 in the
comparable period one year ago. These losses were due primarily to the sale of
approximately $9 million in 30-year fixed rate mortgage loans during the
quarter. When the Bank sells loans, the remaining outstanding fees associated
with these mortgages flow to the income statement as interest income. The
proceeds directly related to the loan balances, however, are reflected as non
interest income. Therefore, even though the sale of these loans generated an
overall profit to the Bank (including the recognition of the fee income), the
non interest portion of the sale reflected a loss, due to the pricing of the
loans at the time of the sale. Other non interest income for the quarter
decreased 14.96% to $68,896 from $81,016.
<PAGE>
Non interest income for the nine months ended December 31, 1997, decreased
2.07% to $1,238,322 from $1,264,481. Service fee income increased 7.55% to
$859,398 from $799,058 due primarily to the increased service fee income from
loans sold and increased fee income relating to strong loan production. The net
gain on sales of investment securities decreased 30.68% to $186,415 from
$268,915. The gains during both of these periods can be attributed primarily
to the sale of selected common stocks from the Bank's portfolio. These gains
were offset, however, by the sale of mortgages during these nine-month periods.
During the nine months ended December 31, 1997, the Bank sold approximately
$24.8 million in loans, compared to $8.1 million the the comparable period one
year ago. Other non interest income was little changed, decreasing 2.04% to
$192,509 from $196,508.
Non Interest Expense
Non interest expense for the three months ended December 31, 1997, decreased
1.76% to $1,788,079 from $1,820,079. Compensation and employee benefits
decreased slightly during the period to $981,902 from $991,479. Building
occupancy for the quarter ended December 31, 1997, increased 2.93% to $284,616
from $276,527. The Bank's FDIC insurance expense for the quarter ended
December 31, 1997, was $13,704, compared to the statutory minimum of $500 paid
in the period one year ago. Data processing increased 15.17% to $116,875 for
the quarter ended December 31, 1997, from $101,484, due primarily to the
overall growth of the Bank. Advertising expenses increased 21.94% to $94,097
for the quarter from $77,165. Other non interest expenses decreased 20.39% to
$296,885 from $372,924. During the quarter ended December 31, 1996, other non
interest expenses were higher than normal due to the recognition of expenses
related to the development of a number of new products for the Bank, including
telephone banking, a home equity line of credit, and a debit card program.
Non interest expense for the nine months ended December 31, 1997, decreased
3.59% to $5,556,019 from $5,762,691. Compensation and employee benefits
decreased 7.50% to $2,995,387 from $3,238,380. The primary reason for this
difference was the one-time recognition of $277,525 in expenses relating to
the Bank's deferred compsensation program during the nine-month period ended
December 31, 1996. If these expenses were excluded from the prior year's
numbers, employee compensation and benefits for the nine months ended December
31, 1997, would have shown an increase of 1.17% over the previous period.
Building occupancy expenses for the nine months were little changed, increasing
1.20% to $845,166 from $835,170. FDIC insurance expenses increased to $40,622,
compared to the statutory minimum of $1,500 paid in the nine-month period one
year ago. Data processing expenses increased 11.00% to $334,695 from $301,530
due primarily to the growth of the Bank. Advertising expenses increased 17.52%
for the nine-month period ended December 31, 1997 to $302,016 from $257,002,
due primarily to items such as the purchase of a Marketing Customer Information
File (MCIF) program and the costs associated with developing the Bank's web site
which can be viewed at http://www.horizon-bank.com. Other expenses decreased
8.06% for the nine-month period to $1,038,133 from $1,129,109. The primary
reason for this difference is mentioned above in the discussion of the quarterly
results for the period ended December 31, 1997.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Horizon Financial Corporation has certain litigation and/or
negotiations in progress resulting from activities arising from
normal operations. In the opinion of management, none of these
matters is likely to have a materially adverse effect on the
Corporation's financial position or results of operation.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
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 FINANCIAL CORP.
By: /s/ V. Lawrence Evans
V. Lawrence Evans
President and Chief Executive Officer
By: /s/ Richard P. Jacobson
Richard P. Jacobson
Chief Financial Officer
Dated: February 12, 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 5092317
<INT-BEARING-DEPOSITS> 7505295
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
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