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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended Commission File Number:
June 30, 2000 333-67107
HEARTLAND BANCSHARES, INC.
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(Exact name of small business issuer as specified in its charter)
Florida 65-0854929
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 U.S. Highway 27 North, Sebring, Florida 33870
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (863) 386-1300
Not Applicable
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(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 Outstanding as of August 15, 2000
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
The following item is amended:
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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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.
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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 $39.5 million at June 30, 2000. Below are the
pertinent liquidity balances and ratios at June 30, 2000.
<TABLE>
<CAPTION>
AT
JUNE 30, 2000
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<S> <C>
Cash and cash equivalents................................$ 15,519,764
Securities available for sale............................$ 15,799,489
CDs over $100,000 to total deposits ratio............... 13.6%
Loan to deposit ratio................................... 26.9%
</TABLE>
Cash and cash equivalents are the primary source of liquidity. At June
30, 2000, cash and cash equivalents amounted to $15.5 million, representing
34.2% of total assets. Securities available for sale provide a secondary source
of liquidity. None of the $16 million in Heartland National Bank's securities
portfolio is scheduled to mature in 2000.
At June 30, 2000, large denomination certificates accounted for 13.6%
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
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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 June 30, 2000:
<TABLE>
<CAPTION>
MINIMUM
JUNE 30, REGULATORY
HEARTLAND NATIONAL BANK 2000 REQUIREMENT
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<S> <C> <C>
Tier 1 Capital 28.1% 4.00%
Total risk-based capital ratio 28.9% 8.00%
Leverage ratio 13.1% 4.00%
HEARTLAND BANCSHARES - CONSOLIDATED
Tier 1 Capital 30.8% 4.00%
Total risk-based capital ratio 31.6% 8.00%
Leverage ratio 14.3% 4.00%
</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.
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Results of Operations
Since Heartland National Bank did not begin operations until the third
quarter of 1999, a comparison of the company's results of operations for the six
months and three months ended June 30, 1999 to the comparable period in 2000
would not be meaningful. This discussion will therefore concentrate on results
of operations for the six months ended June 30, 2000.
Net (loss) for the six months ended June 30, 2000 amounted to
$(178,949), or $(.27) per share, and for the quarter ended June 30, 2000
amounted to $(67,837), or $(.10) 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 six months and quarter ended June
30, 2000.
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
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Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ------- ------- ------
(in thousands)
<S> <C> <C> <C>
Federal funds sold $12,847 $ 384 5.98%
Securities 10,492 351 6.69%
Loans 8,059 404 10.03%
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Total $31,398 $1,139 7.26%
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Deposits $24,596 $ 507 4.12%
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Net interest income $ 632 3.14%
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Net yield earning assets 4.03%
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<CAPTION>
Quarter Ended June 30, 2000
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Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ------- ------- ------
(in thousands)
<S> <C> <C> <C>
Federal funds sold $12,479 $193 6.19%
Securities 13,983 239 6.84%
Loans 9,390 236 10.19%
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Total $35,852 $668 7.46%
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Deposits $35,266 $299 3.40%
======= ==== =====
Net interest income $369 4.06%
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Net yield earning assets 4.12%
=====
</TABLE>
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(b) At March 31, 2000, the allowance for loan losses amounted to
$143,933. During the quarter ended June 30, 2000, an
additional $7,299 was provided to the allowance for loan
losses. As of June 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
$51,166, or .13% of average assets, for the six months ended
June 30, 2000, and amounted to $27,871, or .07% of average
assets, for the quarter ended June 30, 2000.
(d) Non-interest expense for the six months and quarter ended June
30, 2000 amounted to $887,892 and $479,065, respectively. As a
percent of total average assets, non-interest expense amounted
to 2.18% and 1.2%, respectively. The components of
non-interest expense for the six months and quarter ended June
30, 2000 are set forth below:
<TABLE>
<CAPTION>
Six months ended Quarter ended
June 30, 2000 June 30, 2000
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<S> <C> <C>
Salaries and benefits $407,822 $206,364
Occupancy expenses 74,338 35,695
Equipment rentals, depreciation 87,548 45,594
and maintenance
General operating expenses 318,184 191,472
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Total non-interest expense $887,892 $479,125
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</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, 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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: September 19, 2000 By: /s/ James C. Clinard
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James C. Clinard, President and
Chief Executive Officer
(principal executive officer)
Date: September 19, 2000 By: /s/ Janice T. Walker
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Janice T. Walker, Chief Financial
Officer (principal financial and
accounting officer)
