FORM 10-QSB
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 333-32245
Heartland Bancshares, Inc.
(Exact name of small business issuer as specified in its charter)
Indiana 35-2017085
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
420 North Morton Street, P.O. Box 469, Franklin, Indiana 46131
(Address of principal executive offices)
(317) 738-3915
(Registrant's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 registrant's classes of
common stock, as of the latest practicable date.
As of November 10, 1998, the latest practicable date, 1,265,000 shares of the
Registrant's Common Stock, no par value, were issued and outstanding.
Transitional Small Business Disclosure Format Yes No X
<PAGE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
Franklin, Indiana
September 30, 1998
INDEX
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS.................................................
CONSOLIDATED STATEMENTS OF INCOME...........................................
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT.................
CONSOLIDATED STATEMENTS OF CASH FLOWS.......................................
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.........................................................
PART II - OTHER INFORMATION.....................................................
SIGNATURES......................................................................
EXHIBITS........................................................................
<PAGE>
<TABLE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
- --------------------------------------------------------------------------------
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
ASSETS
Cash and due from banks ........................... $ 957 $ 1,140
Federal Funds Sold ................................ 400 --
Securities available-for-sale, at market .......... 9,175 8,012
Loans ............................................. 38,257 3,958
Allowance for loan losses ...................... 574 46
-------- --------
Loans, net .................................. 37,683 3,912
Premises, furniture and equipment, net ............ 1,734 1,207
Accrued interest receivable and other assets ...... 574 248
-------- --------
Total assets ............................. $ 50,523 $ 14,519
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Noninterest-bearing deposits ................... $ 2,832 $ 988
Interest-bearing demand and savings deposits ... 10,370 603
Interest-bearing time deposits ................. 26,166 488
-------- --------
Total deposits .............................. 39,368 2,079
Short-term borrowings .......................... -- 800
Accrued interest payable and other liabilities . 209 136
-------- --------
Total liabilities ........................... 39,577 3,015
Shareholders' equity
Common stock, no par value: 10,000,000 shares
authorized; 1,265,000 shares issued; and
outstanding ................................ 1,265 1,265
Additional paid-in capital ..................... 10,466 10,466
Retained deficit ............................... (876) (240)
Unrealized gain on securities available-for-sale 91 13
-------- --------
Total shareholders' equity .................. 10,946 11,504
-------- --------
Total liabilities and shareholders' equity $ 50,523 $ 14,519
======== ========
</TABLE>
<PAGE>
<TABLE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
<CAPTION>
Period
May 27,
1997
Three Three Nine (date of
Months Months Months inception)
Ended Ended Ended to
--------------September 30,-------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest income
Loans ........................... $ 716 $ -- $ 1,324 $ --
Taxable securities .............. 141 -- 388 --
Other ........................... 14 -- 76 --
----- ----- ------- -----
Total interest income ........ 871 -- 1,788 --
Interest expense
Deposits ........................ 397 -- 745 --
Short-term borrowings ........... 3 10 5 10
----- ----- ------- -----
Total interest expense ....... 400 10 750 10
----- ----- ------- -----
Net interest income ................ 471 (10) 1,038 (10)
Provision for loan losses .......... 207 -- 530
----- ----- ------- -----
Net interest income after
Provision for loan losses ........ 264 (10) 508 (10)
Non-interest income
Service charges and fees ........ 55 -- 176 --
Non-interest expense
Salaries and employee benefits .. 261 32 737 38
Occupancy and equipment
expenses, net ................. 43 10 122 10
Data processing expense ......... 49 -- 118 --
Printing and supplies ........... 16 1 55 1
Advertising ..................... 22 -- 65 --
Directors fees .................. 7 -- 21 --
Professional fees ............... 14 -- 43 --
Credit reports and other loan
expenses ...................... 16 -- 37 --
Amortization of organization
Costs ......................... 26 -- 48 --
Other operating expenses ........ 20 12 74 14
----- ----- ------- -----
Total non-interest expense ......... 474 55 1,320 63
----- ----- ------- -----
Income before income taxes ......... (155) (65) (636) (73)
Income taxes ....................... -- -- -- --
----- ----- ------- -----
Net loss ........................... $(155) $ (65) $ (636) $ (73)
===== ===== ======= =====
Basic and diluted earnings per
Share ......................... $(.12) $(.05) $ (.50) $(.06)
===== ===== ======= =====
Comprehensive income (Note 1) ...... $ (92) $ (65) $ (558) $ (73)
===== ===== ======= =====
</TABLE>
<PAGE>
<TABLE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollar amounts in thousands, except share and per share data)
- --------------------------------------------------------------------------------
<CAPTION>
Unrealized
Gain on Total
Additional Securities Share-
Common Paid-in Retained Available- holders'
Stock Capital Deficit for-Sale Equity
<S> <C> <C> <C> <C> <C>
Balance at inception,
(May 27, 1997) .......... $ -- $ -- $ -- $ -- $ --
Issuance of common stock
1 share ................. -- -- -- -- --
Net loss May 27, 1997 to
September 30, 1997 ...... -- -- (8) -- (8)
-------- -------- -------- -------- --------
Balance
September 30, 1997 ...... -- -- (8) -- (8)
Issuance of common stock
1,265,000 shares ........ 1,265 11,385 -- -- 12,650
Underwriter's discount
On issuance of common
stock ................... -- (816) -- -- (816)
Costs associated with
issuance of common
stock ................... -- (103) -- -- (103)
Net loss three months ended
December 31, 1997 ....... -- -- (232) -- (232)
Change in unrealized
gain on securities
available-for-sale ...... -- -- -- 13 13
-------- -------- -------- -------- --------
Balance
December 31, 1997 ....... 1,265 10,466 (240) 13 11,504
Net loss nine months
ended September 30, 1998 -- -- (636) -- (636)
Change in unrealized
gain on securities
available-for-sale ...... -- -- -- 78 78
-------- -------- -------- -------- --------
Balance
September 30, 1998 ...... $ 1,265 $ 10,466 $ (876) $ 91 $ 10,946
======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
- --------------------------------------------------------------------------------
<CAPTION>
Nine May 27, 1997
Months (date of
Ended inception) to
September 30, September 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities
Net loss ............................................ $ (636) $ (73)
Adjustments to reconcile net loss to net cash
from operating activities
Depreciation and amortization .................... 130 --
Provision for loan losses ........................ 530 --
Change in assets and liabilities:
Accrued interest receivable and other assets .. (375) (6)
Accrued interest payable and other liabilities 73 136
-------- --------
Net cash from operating activities .......... (278) 57
Cash flows from investing activities
Purchase of securities available-for-sale ........... (4,625) --
Maturity of securities available-for-sale ........... 3,540 --
Loans made to customers, net of payments collected .. (34,301) --
Property and equipment expenditures ................. (608) (564)
Organizational costs................................. -- (53)
-------- --------
Net cash from investing activities ............... (35,994) (617)
Cash flows from financing activities
Net change in deposit accounts ...................... 37,289 --
Net change in short-term borrowings ................. (800) 669
Deferred offering costs ............................. -- (107)
Proceeds from issuance of common stock .............. -- --
-------- --------
Net cash from financing activities ............... 36,489 562
-------- --------
Net change in cash and cash equivalents ................ 217 2
Cash and cash equivalents at beginning of year ......... 1,140 --
-------- --------
Cash and cash equivalents at end of year .............. $ 1,357 $ 2
======== ========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest ......................................... $ 597 $ --
Income taxes ..................................... -- --
</TABLE>
<PAGE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: The consolidated financial statements include the
accounts of Heartland Bancshares, Inc. (Corporation or Heartland) and its
wholly-owned subsidiary, Heartland Community Bank (Bank), after elimination of
significant inter-company transactions and accounts. The Bank commenced
operation December 17, 1997.
The Corporation operates primarily in the banking industry, which accounts for
more than 90% of its revenues, operating income and assets. The Bank is engaged
in the business of commercial and retail banking, with operations conducted
through its main office located in Franklin, Indiana and a branch location in
Greenwood, Indiana. The majority of the Bank's income is derived from commercial
and retail business, lending activities and investments. The majority of the
Bank's loans are secured by specific items of collateral including business
assets, real property and consumer assets.
Use of Estimates: To prepare financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided, and future
results could differ. The allowance for loan losses, the fair values of
financial statements, and status of contingencies are particularly subject to
change.
Securities: Securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported separately in shareholders'
equity, net of tax. Securities are written down to fair value when a decline in
fair value is not temporary. Interest and dividend income, adjusted by
amortization of purchase premium or discount, is included in earnings. The Bank
had no held to maturity securities at December 31, 1997 or September 30, 1998.
Loans: Loans are reported at the principal balance outstanding, net of unearned
interest, deferred loan fees and costs, and an allowance for loan losses.
Interest income is reported on the interest method and includes amortization of
net deferred loan fees and costs over the loan term.
Interest income is not reported when full loan repayment is in doubt, typically
when payments are past due over 90 days (180 days for residential mortgages).
Payments received on such loans are reported as principal reductions.
Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance, increased by the provision for loan losses and decreased by
charge-offs less recoveries. Management estimates the allowance balance required
based on past loan loss experience, known and inherent risks in the portfolio,
information about specific borrower situations and estimated collateral values,
economic conditions, and other factors. Allocations of the allowance may be made
for specific loans, but the entire allowance is available for any loan that, in
management's judgment, should be charged-off.
<PAGE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loan impairment is reported when full payment under the loan terms is not
expected. Impairment is evaluated in total for smaller-balance loans of similar
nature such as residential mortgage, consumer and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral. Loans
are evaluated for impairment when payments are delayed, typically 90 days or
more, or when it is probable that all principal and interest amounts will not be
collected according to the original terms of the loan.
Premises, Furniture and Equipment: Premises, furniture and equipment are stated
at cost less accumulated depreciation. Depreciation expense is recognized over
the estimated useful lives of the assets, principally on the straight-line
method. These assets are reviewed for impairment when events indicate the
carrying amount may not be recoverable. Maintenance and repairs are expensed and
major improvements are capitalized.
Intangibles: Organizational costs are included in other assets. Under a new
accounting standard, costs associated with the organization of a business are
now expensed as incurred and any accumulated costs are to be expensed in the
current period. Under previous accounting standards, such costs were accumulated
during the organization or start-up period and expensed over a period of five
years. The new standard is effective for all financial statements for periods
beginning after December 15, 1998 and early adoption is encouraged. Intangibles
are assessed for impairment based on estimated undiscounted cash flows, and
written down if necessary.
Stock Compensation: Expense for employee compensation under stock option plans
is based on Accounting Principles Board Opinion 25, with expense reported only
if options are granted below market price at grant date. Pro forma disclosures
of net income and earnings per share are provided as if the fair value method of
Financial Accounting Standard No. 123 were used for stock-based compensation.
Income Taxes: Income tax expense is the sum of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized.
Statement of Cash Flows: Cash and cash equivalents are defined to include cash
on hand, amounts due from banks, and federal funds sold. The Corporation reports
net cash flows for customer loan transactions, deposit transactions, and
short-term borrowings.
<PAGE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Values of Financial Instruments: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed separately. Fair value estimates involve uncertainties and matters of
significant judgment regarding interest rates, credit risk, prepayments, and
other factors, especially in the absence of broad markets for particular items.
Changes in assumptions or in market conditions could significantly affect the
estimates. The fair value estimates of existing on- and off-balance sheet
financial instruments does not include the value of anticipated future business
or the values of assets and liabilities not considered financial instruments.
Comprehensive Income: Under a new accounting standard, FAS No. 130,
Comprehensive income is now reported for all periods. Comprehensive income
includes both net income or loss and other comprehensive income. Other
comprehensive income includes the change in unrealized gain on securities
available-for-sale, net of tax.
NOTE 2 - GENERAL
These financial statements were prepared in accordance with the Securities and
Exchange Commission instructions for Form 10-QSB and for interim periods do not
include all of the disclosures necessary for a complete presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. These financial statements have been
prepared on a basis consistent with the annual financial statements and include,
in the opinion of management, all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the results of
operations and financial position at the end of and for the periods presented.
NOTE 3 - PER SHARE DATA
The following illustrates the computation of basic and diluted earnings per
share.
<TABLE>
<CAPTION>
Three May 27, 1997 Nine
months (date of months
ended inception) to ended
September 30, September 30, September 30,
1998 1997 1998
<S> <C> <C> <C>
Basic earnings per share
Net loss (in thousands) .... $ (155) $ (8) $ (636)
Weighted average shares
outstanding ............... 1,265,000 1,265,000 1,265,000
----------- ----------- -----------
Basic earnings per share $ (.12) $ (.01) $ (.50)
=========== =========== ===========
Diluted earnings per share
Net loss (in thousands) .... $ (155) $ (8) $ (636)
Weighted average shares
outstanding ............... 1,265,000 1,265,000 1,265,000
Stock options .............. 83,000 -- 83,000
Assumed shares repurchased
upon exercise ............. (92,499) (--) (81,504)
----------- ----------- -----------
Diluted average shares
outstanding .......... 1,255,501 1,265,000 1,266,496
----------- ----------- -----------
Diluted earnings per
share ............... $ (.12) $ (.01) $ (.50)
=========== =========== ===========
</TABLE>
<PAGE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 1998
- --------------------------------------------------------------------------------
INTRODUCTION
The following discussion focuses on the plan of operation, the financial
condition at September 30, 1998 compared to December 31, 1997 and the results of
operations for the three and nine month periods ended September 30, 1998 in
comparison to the periods from inception May 27, 1997, ended September 30, 1997
and the three months ended September 30, 1997 of Heartland Bancshares, Inc.
(Heartland). Heartland was incorporated May 27, 1997 and therefore no additional
information is available for the nine-month period ended September 30, 1997.
Heartland was formed with the specific intent to form a wholly owned subsidiary
state chartered bank (Heartland Community Bank or Bank). Heartland received
approval from the Federal Reserve Bank of Chicago to be a bank holding company
in the fall of 1997. Operations of the Bank began December 17, 1997.
This discussion should be read in conjunction with the interim financial
statements and related footnotes.
The registrant is not aware of any trends, events or uncertainties that will
have or are reasonably likely to have a material effect on the liquidity,
capital resources or operations except as discussed herein. Also, the Registrant
is not aware of any current recommendations by regulatory authorities that would
have such effect if implemented.
GENERAL
As of October 2, 1997, Heartland raised approximately $11,735,000 in equity
capital through the sale of 1,265,000 shares of the Company's common stock at
$10 per share, net of underwriting discounts and offering costs. Proceeds from
the offering were used to capitalize the Bank and provide working capital.
Heartland's only activity beyond holding stock of the Bank is investment in
securities using working capital provided by the issuance of shares of common
stock.
Heartland's plan of operation is centralized around the growth of the Bank. The
primary operation of the Bank is to accept deposits and make loans. The
operating results of Heartland are affected by general economic conditions, the
monetary and fiscal policies of federal agencies and the regulatory policies of
agencies that regulate financial institutions. Heartland's cost of funds is
influenced by interest rates on competing investments and general market rates
of interest. Lending activities are influenced by consumer and commercial
demand, which in turn are affected by the interest rates at which such loans are
made, general economic conditions and the availability of funds for lending
activities.
<PAGE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 1998
- --------------------------------------------------------------------------------
The Federal Financial Institutions Examination Council (FFIEC) has issued
several statements regarding preparing for the Year 2000 date change and related
issues. Those statements have identified specific actions and plans to be
adopted by financial institutions, all of which would be materially adversely
affected by Year 2000 failure of loan and deposit data processing systems. As of
September 30, 1998, Heartland has implemented the procedures and plans set out
by FFIEC. Heartland has begun the evaluation and testing of computer and
software systems in cooperation with its independent data processing service
provider and estimates that the amount of costs that will be incurred to prepare
for the date change will not be significant. Although Heartland has no reason to
expect that its data processing and other costs and expenses will be significant
or that its financial condition and results of operations will be adversely
affected by Year 2000 problems, this is a forward-looking statement, and actual
expenses may vary materially from current expectations due to the possibility,
among other risks, that the Company's data processing service provider will be
unable to perform in accordance with the Year 2000 plan and the possibility that
the Company's customers may not be Year 2000 compliant.
FINANCIAL CONDITION
Heartland experienced growth through the first nine months of operations for the
Bank. Total assets at September 30, 1998 are $50.5 million, an increase of $36.0
million or 248.28% from the December 31, 1997 total assets of $14.5 million.
Investment securities total $9.2 million at September 30, 1998 compared to $8.0
million at December 31, 1997, an increase of $1.2 million or 15.00%. Total gross
loans were $38.3 million at September 30, 1998, representing growth of $34.3
million, or 858.45%, from the December 31, 1997 total of $ 4.0 million. Fixed
assets increased from $1.2 million at December 31, 1997 to $1.8 million at
September 30, 1998, net of accumulated depreciation, an increase of $600,000 or
45.73%.
An increase in total deposits of $37.3 million to $39.4 million at September 30,
1998, or 1776.19% from $2.1 million at December 31, 1997 primarily funded the
growth in assets. Heartland eliminated the short-term borrowings of $800,000
that were outstanding at December 31, 1997.
RESULTS OF OPERATIONS
Heartland incurred a net loss of $636,000 for the nine months ended September
30, 1998 compared to a net loss of $73,000 for the period from inception May 27,
1997, ended September 30, 1997. Heartland's net loss for the three months ended
September 30, 1997 was $65,000 and was $155,000 for the three months ended
September 30, 1998. Interest income for the nine months and three months ended
September 30, 1998 was $1.8 million and $871,000 respectively and was $0 for the
periods from inception May 27, 1997 through September 30, 1997 and the three
months ended September 30, 1997. Non-interest income was $176,000 and $55,000
for the nine months and three months ended September 30, 1998. Comparatively,
non-interest income was $0 for both the period from inception May 27, 1997,
ended September 30, 1997, and the three months ended September 30, 1997.
Interest expense of $750,000 and $400,000 was incurred during the nine months
and three months ended September 30, 1998. Interest expense during both the
period from inception May 27, 1997, through September 30, 1997 and the three
months ended September 30, 1997 was $10,000. Interest expense during the nine
months and three months ended September 30, 1998 is related to interest bearing
deposits and short-term borrowings. Interest expense during the period from
inception May 27, 1997, through September 30, 1997 is related to related party
notes payable outstanding during a portion of the development period.
<PAGE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 1998
- --------------------------------------------------------------------------------
Provision for loan losses recorded during the nine month and three month periods
ended September 30, 1998 was $530,000 and $207,000 compared to $0 in the period
from inception May 27, 1997 to September 30, 1997.
Salaries and benefits expense was $737,000 for the nine months ended September
30, 1998 and $261,000 for the three months ended September 30, 1998 compared to
$38,000 for the period from inception May 27, 1997, through September 30, 1997
and $32,000 for the three months ended September 30, 1997.
Net occupancy and equipment expenses of $122,000 and $43,000 were incurred
during the nine months and three months ended September 30, 1998. During the
period from inception May 27, 1997, ended September 30, 1997 and the three
months ended September 30, 1997 the net occupancy and equipment expenses were
$10,000. The Bank entered into a 10 year lease agreement with a non-related
party for a facility located on Highway 135 in Greenwood, Indiana and commenced
banking activities in that facility in May, 1998.
Data processing expense was $118,000 for the nine months ended September 30,
1998 and $49,000 for the three months ended September 30, 1998. No data
processing expense was incurred during the period from inception May 27, 1997,
through September 30, 1997. In the fourth quarter of 1997, the Bank entered into
a three-year contract with a third party service provider for core data
processing, with monthly expense partially based on volume of accounts and
transactions.
Printing and supplies expense was $55,000 and $16,000 for the nine months and
three months ended September 30, 1998 and $1,000 for both the period from
inception May 27, 1997, through September 30, 1997 and the three months ended
September 30, 1998.
Heartland incurred advertising expense of $65,000, $22,000 and $0 during the
nine months ended September 30, 1998, the three months ended September 30, 1998
and the period from inception May 27, 1997, ended September 30, 1997,
respectively.
Directors fees expense for the nine months ended September 30, 1998 were
$21,000, $7,000 for the three months ended September 30, 1998 and $0 for the
period from inception May 27, 1997, ended September 30, 1997.
Professional fees expense for the nine months ended September 30, 1998 were
$43,000, $14,000 for the three months ended September 30, 1998 and $0 for the
period from inception May 27, 1997, ended September 30, 1997.
Credit reports and other loan related expenses for the nine months ended
September 30, 1998 were $37,000, $16,000 for the three months ended September
30, 1998 and $0 for the period from inception May 27, 1997, ended September 30,
1997.
During the period of organization, Heartland accumulated costs associated with
the organization and began to amortize the resultant asset over a five-year
period beginning when organization was complete. A new accounting standard that
requires all accumulated organization intangible assets to be currently expensed
was adopted during 1998. As a result Heartland will expense the remaining
organization costs during 1998. The expense incurred for the nine months ended
September 30, 1998 was $48,000 and for the three months ended September 30, 1998
was $26,000. No amortization of organization costs was incurred during the
period from inception May 27, 1997 ended September 30, 1997.
<PAGE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
MANAGEMENT'S DISCUSSION AND ANALYSIS
September 30, 1998
- --------------------------------------------------------------------------------
The remaining expenses of $74,000 during the nine months ended September 30,
1998 $20,000 during the three months ended September 30, 1998, $14,000 during
the period from inception May 27, 1997, ended September 30, 1997, and $12,000
during the three months ended September 30, 1997 relate to various other items
such as postage, insurance and training.
CAPITAL RESOURCES
Shareholders' equity totaled $10.9 million at September 30, 1998, compared to
$11.5 million at December 31, 1997. The change is attributable to the net loss
of $636,000 for the nine months ended September 30, 1998, partially offset by an
increase of $78,000 in unrealized gain on securities available-for-sale from
$13,000 at December 31, 1997 to $91,000 at September 30, 1998. As of September
30, 1998, 1,265,000 shares of common stock were issued and outstanding.
Additional paid-in capital was $10.5 million at December 31, 1997 and September
30, 1998.
LIQUIDITY
Liquidity management for Heartland focuses on the ability to keep funds
available to meet the requirements of withdrawals of depositors and funding of
new loans and investments. The primary source of liquidity for Heartland is the
receipt of new deposits. The Bank has the ability to borrow Federal funds from
other commercial banks on a daily basis. Such borrowings are secured by
investment securities. Heartland manages liquidity through the use of deposits
with other financial institutions, Federal Funds and investment securities.
<PAGE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
PART II
- --------------------------------------------------------------------------------
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibit 27: Financial Data Schedule
(b) No reports on Form 8-K were filed during the three months
ended September 30, 1998.
<PAGE>
HEARTLAND BANCSHARES, INC.
FORM 10-QSB
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.
HEARTLAND BANCSHARES, INC.
(Registrant)
/s/Steve Bechman
Date: November 13, 1998 Steve Bechman
President and Chief Executive Officer
/s/Jeffery D. Joyce
Date: November 13, 1998 Jeffery D. Joyce
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the filer's Form 10-QSB for the Quarter
ended September 30, 1998, and is filed in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0001042905
<NAME> Heartland Bancshares, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 957
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 9,175
<INVESTMENTS-MARKET> 9,175
<LOANS> 38,257
<ALLOWANCE> 574
<TOTAL-ASSETS> 50,523
<DEPOSITS> 39,368
<SHORT-TERM> 0
<LIABILITIES-OTHER> 209
<LONG-TERM> 0
0
0
<COMMON> 11,731
<OTHER-SE> (785)
<TOTAL-LIABILITIES-AND-EQUITY> 50,523
<INTEREST-LOAN> 1,324
<INTEREST-INVEST> 388
<INTEREST-OTHER> 76
<INTEREST-TOTAL> 1,788
<INTEREST-DEPOSIT> 745
<INTEREST-EXPENSE> 750
<INTEREST-INCOME-NET> 1,038
<LOAN-LOSSES> 530
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,320
<INCOME-PRETAX> (636)
<INCOME-PRE-EXTRAORDINARY> (636)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (636)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> (.50)
<YIELD-ACTUAL> 2.19
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 46
<CHARGE-OFFS> 2
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 574
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 574
</TABLE>
