<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
September 30, 2000 333-67107
HEARTLAND BANCSHARES, INC.
(Exact name of small business issuer as specified in its charter)
Florida 65-0854929
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 U.S. Highway 27 North, Sebring, Florida 33870
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (863) 386-1300
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, $0.10 par value 652,030
Class Shares outstanding as of November 9, 2000
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HEARTLAND BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,458,480 $ 1,640,755
Federal funds sold 9,942,000 13,586,000
------------ ------------
Total cash and cash equivalents 11,400,480 15,226,755
Securities available for sale 15,898,465 3,136,468
Loans:
Commercial, financial and agricultural 6,546,118 3,521,046
Real estate - mortgage 3,845,965 863,371
Installment and consumer loans 3,760,181 756,748
------------ ------------
Total loans 14,152,264 5,141,165
Less: Allowance for loan losses (176,753) (111,633)
------------ ------------
Net loans 13,975,511 5,029,532
Property and equipment 2,744,134 2,767,509
Other assets 708,771 341,466
------------ ------------
TOTAL ASSETS $ 44,727,361 $ 26,501,730
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non interest bearing demand $ 6,753,401 $ 3,166,211
Savings, NOW, and money market 18,447,033 10,174,983
Time deposits under $100,000 8,436,534 3,676,694
Time deposits over $100,000 5,063,894 3,376,000
------------ ------------
Total deposits 38,700,862 20,393,888
Short term borrowing -- --
Other liabilities 183,940 92,702
------------ ------------
Total Liabilities 38,884,802 20,486,590
------------ ------------
Shareholders' Equity
Common stock, $.10 par value, 10,000,000 shares
authorized; 652,030 shares issued and outstanding 65,203 65,203
Preferred stock - $.01 par value; 1,000,000 shares
authorized; no shares issued or outstanding -- --
Additional paid-in capital 6,437,152 6,437,152
Retained earnings (deficit) (715,237) (477,690)
Accumulated other comprehensive income (loss)
SFAS 115 55,441 (9,525)
------------ ------------
Total Shareholders' Equity 5,842,559 6,015,140
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 44,727,361 $ 26,501,730
============ ============
</TABLE>
<PAGE> 3
HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
------------ ------------
<S> <C> <C>
Interest income
Interest and fees on loans $ 714,899 $ 911
Interest on securities (escrow acct) 585,774 120,387
Interest on federal funds sold 624,018 690
----------- -----------
Total interest income 1,924,691 121,988
----------- -----------
Interest expense
Interest on deposits 874,338 6,526
Interest on short term borrowing -- 19,734
----------- -----------
Total interest expense 874,338 26,260
----------- -----------
Net interest income 1,050,353 95,728
Provision for loan losses 65,104 9,070
----------- -----------
Net interest income (expense)
after provision for loan losses 985,249 86,658
----------- -----------
Noninterest income
Service charges and fees 61,995 --
Other income 21,527 1,386
----------- -----------
Total noninterest income 83,522 1,386
----------- -----------
Noninterest expense
Salaries and employee benefits 635,729 209,533
Occupancy expenses 136,130 3,178
Equipment expenses 138,633 5,539
Other operating expenses 486,226 63,953
----------- -----------
Total noninterest expense 1,396,718 282,203
----------- -----------
Loss before income taxes (327,947) (194,159)
Income tax benefit (90,400) (108,000)
----------- -----------
NET LOSS $ (237,547) $ (86,159)
=========== ===========
NET LOSS PER SHARE $ (0.36) $ (1.24)
=========== ===========
Average shares outstanding 652,030 69,621
=========== ===========
</TABLE>
<PAGE> 4
HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended September 30,
2000 1999
---------- ----------
<S> <C> <C>
Interest income
Interest and fees on loans $ 311,144 $ 911
Interest on securities (escrow acct) 234,012 77,524
Interest on federal funds sold 240,121 690
---------- ----------
Total interest income 785,277 79,125
---------- ----------
Interest expense
Interest on deposits 367,400 6,526
Interest on short term borrowing -- 6,264
---------- ----------
Total interest expense 367,400 12,790
---------- ----------
Net interest income 417,877 66,335
Provision for loan losses 25,505 9,070
---------- ----------
Net interest income (expense)
after provision for loan losses 392,372 57,265
---------- ----------
Noninterest income
Service charges and fees 23,915 --
Other income 8,441 1,386
---------- ----------
Total noninterest income 32,356 1,386
---------- ----------
Noninterest expense
Salaries and employee benefits 227,907 143,317
Occupancy expenses 61,792 3,178
Equipment expenses 51,085 5,539
Other operating expenses 168,042 44,194
---------- ----------
Total noninterest expense 508,826 196,228
---------- ----------
Loss before income taxes (84,098) (137,577)
Income tax benefit (25,500) (108,000)
---------- ----------
NET LOSS $ (58,598) $ (29,577)
========== ==========
NET LOSS PER SHARE $ (0.08) $ (0.16)
========== ==========
Average shares outstanding 652,030 180,812
========== ==========
</TABLE>
<PAGE> 5
HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
------------ ------------
<S> <C> <C>
Operating Activities
Net (loss) $ (237,547) $ (86,159)
Adjustments to reconcile net loss to net cash used in
operating activities:
Deferred income taxes (90,400) (108,000)
Provision for loan losses 65,104 9,070
Depreciation and amortization 148,837 10,875
Net accretion on securities available for sale 25,840 --
Change in year-end balances of:
Other assets (264,319) (34,752)
Other liabilities 8,997 4,946
------------ ------------
Net cash used in operating activities (343,488) (204,020)
------------ ------------
Investing Activities
Purchase of securities available for sale (12,653,284) (180,000)
Net funding of loans (9,011,099) (383,466)
Acquisition of property and equipment (125,378) (1,652,359)
------------ ------------
Net cash used in investing activities (21,789,761) (2,215,825)
------------ ------------
Financing Activities
Net deposits 18,306,974 7,648,906
Sale of common stock -- 6,492,355
Repayment of lines of credit -- (737,875)
------------ ------------
Net cash provided by financing activities 18,306,974 13,403,386
------------ ------------
Net increase in cash and cash equivalents (3,826,275) 10,983,541
Cash and cash equivalents:
Beginning balance 15,226,755 20,879
------------ ------------
Ending balance $ 11,400,480 $ 11,004,420
============ ============
</TABLE>
<PAGE> 6
HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Nine Months Ended September 30, 1999 and 2000
(Unaudited)
<TABLE>
<CAPTION>
Common Additional Retained Accumulated Total
Stock Par Paid-in Earnings Other Shareholders'
Value Capital (Deficit) Comprehensive Equity
Income (Loss)
--------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1998 $ 100 $ 9,900 $ (92,419) $ -- $ (85,669)
Issuance of 651,030 shares of common
stock at $10.00 per share 65,103 6,427,252 -- -- 6,492,355
Net loss for the nine months ended
9/30/1999 -- -- (86,159) -- (86,159)
-------- ------------ ------------ -------- ------------
BALANCE SEPTEMBER 30, 1999 $ 65,203 $ 6,437,152 $ (178,578) $ -- $ 6,320,527
======== ============ ============ ======== ============
BALANCE DECEMBER 31, 1999 $ 65,203 $ 6,437,152 $ (477,690) $ (9,525) $ 6,015,140
Comprehensive Income:
Net loss for the nine months ended
9/30/2000 -- -- (237,547) -- (237,547)
Other comprehensive income:
Change in unrealized loss
on securities available for sale -- -- -- 64,966 64,966
Total comprehensive income (loss) -- -- -- -- (172,581)
-------- ------------ ------------ -------- ------------
BALANCE SEPTEMBER 30, 2000 $ 65,203 $ 6,437,152 $ (715,237) $ 55,441 $ 5,842,559
======== ============ ============ ======== ============
</TABLE>
<PAGE> 7
HEARTLAND BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
Nine Months Ended September 30, 2000
NOTE 1 - ORGANIZATION
Heartland Bancshares, Inc. is a Florida corporation with headquarters
in Sebring, Florida. Heartland Bancshares was formed to organize and
own 100% of the capital stock of Heartland National Bank. Heartland
National Bank is a nationally chartered full service institution with
an office in Sebring, Florida, and an office in Lake Placid, Florida.
Heartland National Bank opened for business on September 7, 1999.
The accompanying consolidated financial statements include the accounts
of Heartland Bancshares and Heartland National Bank. All significant
inter-company accounts and balances have been eliminated.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions of Form 10-QSB.
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 of normal recurring entries) considered necessary for a
fair presentation of Heartland Bancshares' financial results have been
made. Operating results for the nine months ended September 30, 2000
may not be indicative of the results that may be expected for the year
ending December 31, 2000.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Heartland Bancshares, Inc. was incorporated in Florida in August 1998
to serve as a holding company for Heartland National Bank, a national banking
association then in organization. For approximately the first 13 months
following its incorporation, the main activities of Heartland Bancshares
centered on applying for a national bank charter, applying to become a bank
holding company, hiring and training bank employees, preparing the banking
facilities and premises for opening, and conducting an initial public offering
of common stock to raise a minimum of $6.2 million to fund the startup of
Heartland National Bank. By August 1999, Heartland Bancshares had received
subscriptions to purchase common stock in an amount in excess of the required
minimum, and on September 7, 1999, Heartland National Bank commenced operations.
Financial Condition
Management continuously monitors the financial condition of Heartland
National Bank in order to maintain sufficient capital to support the operations
of Heartland National Bank and Heartland Bancshares and to protect the
depositors of Heartland National Bank. Significant items affecting Heartland
National Bank's financial condition are discussed below.
Asset Quality
A major key to long-term earnings growth is the maintenance of a
high-quality loan portfolio. Heartland National Bank's directive in this regard
is carried out through its policies and procedures for extending credit to
Heartland National Bank's customers. The goal of these policies and procedures
is to provide a sound basis for new credit extensions and an early recognition
of problem assets to allow the most flexibility in their timely disposition.
Principal banking operations commenced on September 7, 1999, and
management has not identified any non-performing assets. Additions to the
allowance for loan losses will be made periodically to maintain the allowance at
an appropriate level based upon management's analysis of potential risk in the
loan portfolio. The amount of the loan loss provision will generally be
determined by an evaluation of the level of loans outstanding, the level of
non-performing loans, historical loan loss experience, delinquency trends, the
amount of actual losses charged to the reserve in a given period, and assessment
of present and anticipated economic conditions.
<PAGE> 9
Liquidity
Liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities, as well as to maintain sufficient
funds to cover deposit withdrawals and payment of operating obligations.
Heartland National Bank's liquidity position was initially established through
Heartland Bancshares' purchase of $6.0 million of the common stock of Heartland
National Bank. As Heartland National Bank grows, liquidity needs can be met
either by converting assets to cash or by attracting new deposits. Heartland
National Bank had deposits of $38.7 million at September 30, 2000. Below are the
pertinent liquidity balances and ratios at September 30, 2000.
<TABLE>
<CAPTION>
AT
SEPTEMBER 30, 2000
------------------
<S> <C>
Cash and cash equivalents ................... $ 11,400,480
Securities available for sale ............... $ 15,898,465
CDs over $100,000 to total deposits ratio . 13.1%
Loan to deposit ratio ..................... 36.6%
</TABLE>
Cash and cash equivalents are the primary source of liquidity. At
September 30, 2000, cash and cash equivalents amounted to $11.4 million,
representing 25.5% of total assets. Securities available for sale provide a
secondary source of liquidity. None of the $15.9 million in Heartland National
Bank's securities portfolio is scheduled to mature in 2000.
At September 30, 2000, large denomination certificates accounted for
13.1% of total deposits. Large denomination CDs are generally more volatile than
other deposits. As a result, management continually monitors the competitiveness
of the rates it pays on its large denomination CDs and periodically adjusts its
rates in accordance with market demands. Significant withdrawals of large
denomination CDs could have a material adverse effect on Heartland National
Bank's liquidity. Management believes that since a majority of the above
certificates were obtained from Heartland National Bank customers residing in
Highlands County, Florida, the volatility of such deposits is lower than if such
deposits were obtained from depositors residing outside of Highlands County, as
outside depositors are generally considered to be more likely to be interest
rate sensitive.
Management knows of no trends, demands, commitments, events or
uncertainties that should result in or are reasonably likely to result in
Heartland Bancshares' liquidity increasing or decreasing in any material way in
the foreseeable future.
Capital Adequacy
There are two primary measures of capital adequacy for banks and bank
holding companies: (i) risk-based capital guidelines and (ii) the leverage
ratio.
The risk-based capital guidelines measure the amount of a bank's
required capital in relation to the degree of risk perceived in its assets and
its off-balance sheet items. Under the risk-based capital guidelines, capital is
divided into two "tiers." Tier 1 capital consists of common shareholders'
equity, non-cumulative perpetual preferred stock and any related surplus and
minority interest in the equity accounts of consolidated subsidiaries. Goodwill
is subtracted from the total. Tier 2 capital consists of the allowance for loan
losses, hybrid capital instruments, term subordinated debt and intermediate term
<PAGE> 10
preferred stock. Banks are required to maintain a minimum risk-based capital
ratio of 8.0%, with at least 4.0% consisting of Tier 1 capital.
The second measure of capital adequacy is the leverage ratio, which is
computed by dividing Tier 1 capital by average total assets during the most
recent quarter. The OCC has established a 4.0% minimum leverage ratio
requirement for all banks that are not rated CAMELS 1.
The table below illustrates Heartland National Bank's and Heartland
Bancshares' regulatory capital ratios at September 30, 2000:
<TABLE>
<CAPTION>
MINIMUM
SEPTEMBER 30, REGULATORY
2000 REQUIREMENT
------------- -----------
<S> <C> <C>
HEARTLAND NATIONAL BANK
Tier 1 Capital 24.9% 4.0%
Total risk-based capital ratio 25.7% 8.0%
Leverage ratio 11.9% 4.0%
HEARTLAND BANCSHARES - CONSOLIDATED
Tier 1 Capital 27.3% 4.0%
Total risk-based capital ratio 28.1% 8.0%
Leverage ratio 13.0% 4.0%
</TABLE>
The above ratios indicate that the capital positions of Heartland
Bancshares and Heartland National Bank are sound and that Heartland Bancshares
is well positioned for future growth.
<PAGE> 11
Results of Operations
Since Heartland National Bank did not begin operations until September
7, 1999, a comparison of the company's results of operations for the nine months
and three months ended September 30, 2000 to the comparable period in 1999 would
not be meaningful. This discussion will therefore concentrate on results of
operations for the nine months ended September 30, 2000.
Net (loss) for the nine months ended September 30, 2000 amounted to
$(237,547), or $(.36) per share, and for the quarter ended September 30, 2000
amounted to $(58,598), or $(.08) per share. The following is a brief discussion
of the more significant components of net income:
(a) Net interest income represents the difference between interest
received on interest earning assets and interest paid on
interest bearing liabilities. The following table sets forth
the main components of interest earning assets and interest
bearing liabilities for the nine months and quarter ended
September 30, 2000.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 2000
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ------- -------- -------
(dollars in thousands)
<S> <C> <C> <C>
Federal funds sold $12,580 $ 586 6.21%
Securities 12,268 624 6.78%
Loans 9,401 715 10.14%
------- ------- -------
Total $34,249 $ 1,925 7.49%
======= ======= =======
Deposits $33,559 $ 875 3.48%
======= ======= =======
Net interest income $ 1,050 4.01%
======= =======
Net yield earning assets 4.09%
=======
<CAPTION>
Quarter Ended
September 30, 2000
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ------- ------- ------
(dollars in thousands)
<S> <C> <C> <C>
Federal funds sold $12,051 $ 234 7.77%
Securities 15,838 240 6.06%
Loans 12,054 311 10.32%
------- ------ ------
Total $39,943 $ 785 7.86%
======= ====== ======
Deposits $39,321 $ 367 3.73%
======= ====== ======
Net interest income $ 418 4.13%
====== ======
Net yield earning assets 4.19%
======
</TABLE>
<PAGE> 12
(b) At June 30, 2000, the allowance for loan losses amounted to
$151,279. During the quarter ended September 30, 2000, an
additional $25,505 was provided to the allowance for loan
losses. There have been charge-offs of $2,683 since the
opening of Heartland National Bank. As of September 30, 2000,
management considers the allowance for loan losses to be
adequate to absorb expected future losses. However, there can
be no assurance that charge-offs in future periods will not
exceed the allowance for loan losses or that additional
provisions to the allowance will not be required.
(c) Non-interest income, which consists primarily of service fees
on deposit accounts and other miscellaneous fees, amounted to
$83,522, or .28% of average assets, for the nine months ended
September 30, 2000, and amounted to $32,356, or .29% of
average assets, for the quarter ended September 30, 2000.
(d) Non-interest expense for the nine months and quarter ended
September 30, 2000 amounted to $1,396,718 and $508,826,
respectively. As a percent of total average assets,
non-interest expense amounted to 4.77% and 4.55%,
respectively. The components of non-interest expense for the
nine months and quarter ended September 30, 2000 are set forth
below:
<TABLE>
<CAPTION>
Nine months ended Quarter ended
September 30, 2000 September 30, 2000
------------------ ------------------
<S> <C> <C>
Salaries and benefits $ 635,729 $ 227,907
Occupancy expenses 136,130 61,792
Equipment rentals, depreciation and
maintenance 138,633 51,085
General operating expenses 486,226 168,042
---------- ----------
Total non-interest expense $1,396,718 $ 508,826
========== ==========
</TABLE>
Heartland Bancshares is not aware of any current recommendation by any
regulatory authority which, if implemented, would have a material effect on
Heartland Bancshares' liquidity, capital resources or results of operations.
Cautionary Note Regarding Forward-Looking Statements
Heartland Bancshares may, from time to time, make written or oral
forward-looking statements, including statements contained in Heartland
Bancshares' filings with the Securities and Exchange Commission and its reports
to stockholders. Such forward-looking statements are made based on management's
belief as well as assumptions made by, and information currently available to,
management pursuant to "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Heartland Bancshares' actual results may differ
materially from the results anticipated in these forward-looking statements due
to a variety of factors, including governmental monetary and fiscal policies,
deposit levels, loan demand, loan collateral values, securities portfolio values
and interest rate risk management; the effects of competition in the banking
business from other commercial banks, savings and loan associations, mortgage
banking firms, consumer finance companies, credit unions, securities brokerage
firms, insurance companies, money market mutual funds and other financial
institutions operating in Heartland Bancshares' market area and elsewhere,
including institutions operating through the Internet; changes in government
regulations relating to the banking industry, including regulations relating to
branching and acquisitions; failure of assumptions underlying the establishment
of reserves for loan losses, including the value of collateral underlying
delinquent loans,
<PAGE> 13
and other factors. Heartland Bancshares cautions that such factors are not
exclusive. Heartland Bancshares does not undertake to update any forward-looking
statements that may be made from time to time by, or on behalf of, Heartland
Bancshares.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibit is filed with this Report.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K. No report on Form 8-K was filed during
the quarter ended September 30, 2000.
<PAGE> 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.
Date: November 13, 2000 By: /s/ James C. Clinard
------------------------------------------
James C. Clinard, President and Chief Executive
Officer (principal executive officer)
Date: November 13, 2000 By: /s/ Martha J. Kelley
-----------------------------------------------
Martha J. Kelley, Chief Financial Officer and
Cashier (principal financial and accounting
officer)
