<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:
March 31, 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)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]
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 May 10, 2000
Transitional Small Business Disclosure Format:
Yes [X] No [ ]
<PAGE> 2
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
HEARTLAND BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS March 31, 2000 December 31, 1999
- ------ -------------- -----------------
<S> <C> <C>
Cash and due from banks ......................................... $ 1,514,589 $ 1,640,755
Federal funds sold .............................................. 11,235,000 13,586,000
------------- -------------
Total cash and cash equivalents ....................... 12,749,589 15,226,755
Securities available for sale ................................... 11,966,385 3,136,468
Loans:
Commercial, financial and agricultural ....................... 6,075,122 3,521,046
Real estate - mortgage ....................................... 412,186 863,371
Installment and consumer loans ............................... 2,013,544 756,748
------------- -------------
Total loans ......................................... 8,500,852 5,141,165
Less: Allowance for loan losses ................................ (143,933) (111,633)
------------- -------------
Net loans ....................................... 8,356,919 5,029,532
Property and equipment .......................................... 2,761,548 2,767,509
Other assets .................................................... 567,144 341,466
------------- -------------
TOTAL ASSETS .................................... $ 36,401,585 $ 26,501,730
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non interest bearing demand ................................ $ 6,163,647 $ 3,166,211
Savings, NOW, and money market ............................. 14,128,610 10,174,983
Time deposits under $100,000 ............................... 5,914,451 3,676,694
Time deposits over $100,000 ................................ 4,297,000 3,376,000
------------- -------------
Total deposits ....................................... 30,503,708 20,393,888
Short term borrowing .......................................... -- --
Other liabilities ............................................. 15,664 92,702
------------- -------------
Total Liabilities ............................... 30,519,372 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) ................................... (588,742) (477,690)
Accumulated other comprehensive income (loss) ................. (31,400) (9,525)
------------- -------------
Total Shareholders' Equity ...................... 5,882,213 6,015,140
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY .......................................... $ 36,401,585 $ 26,501,730
============= =============
</TABLE>
<PAGE> 3
HEARTLAND BANCSHARES, INC
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
2000 1999
---- ----
<S> <C> <C>
Interest income
Interest and fees on loans .................................... $ 168,221 $ --
Interest on securities ........................................ 112,464 --
Interest on federal funds sold ................................ 191,147 --
------------- -------------
Total interest income ............................... 471,832 --
------------- -------------
Interest expense
Interest on deposits .......................................... 207,512 --
Interest on short term borrowing .............................. -- 13,470
------------- -------------
Total interest expense ............................. 207,512 13,470
------------- -------------
Net interest income (expense) ...................... 264,320 (13,470)
Provision for loan losses ....................................... 32,300 --
------------- -------------
Net interest income (expense)
after provision for loan losses .................. 232,020 (13,470)
------------- -------------
Noninterest income
Service charges and fees ..................................... 17,167 --
Other income ................................................. 6,128 10,450
------------- -------------
Total noninterest income .......................... 23,295 10,450
------------- -------------
Noninterest expense
Salaries and employee benefits ............................... 201,458 17,765
Occupancy expenses ........................................... 38,643 --
Equipment expenses ........................................... 41,954 --
Other operating expenses ..................................... 126,772 12,857
------------- -------------
Total noninterest expense ........................ 408,827 30,622
------------- -------------
Loss before income taxes ......................... (153,512) (33,642)
Income tax (benefit) ............................. (42,400) --
------------- -------------
NET LOSS ......................................... $ (111,112) $ (33,642)
============= =============
NET LOSS PER SHARE ............................... $ (0.17) $ (2.74)
============= =============
Average shares outstanding ....................... 652,030 12,264
============= =============
</TABLE>
<PAGE> 4
HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Quarters Ended March 31, 1999 and 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Common Additional Retained Other Total
Stock Par Paid-in Earnings Comprehensive Shareholders'
Value Capital (Deficit) Income (Loss) Equity
---------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1998 ................. $ 100 $ 9,900 $ (92,419) $ -- $ (82,419)
Issuance of 13,500 shares of common
stock at $10.00 per share .............. 1,350 133,650 -- -- 135,000
Net loss for first quarter 1999 ........... -- -- (33,642) -- (33,642)
---------- ---------- ---------- ---------- -----------
BALANCE MARCH 31, 1999 .................... $ 1,450 $ 143,550 $ (126,061) $ -- $ 18,939
========== ========== ========== ========== ===========
BALANCE DECEMBER 31, 1999 ................. $ 65,203 $6,437,152 $ (477,690) $ (9,525) $ 6,015,140
Comprehensive Income:
Net loss for first quarter 2000 ........ -- -- (111,052) -- $ (111,052)
Other comprehensive income:
Change in unrealized loss
on securities available for
sale ............................ -- -- -- (21,875) (21,875)
-----------
Total comprehensive income
(loss) .............................. -- -- -- -- $ (132,927)
---------- ---------- ---------- ---------- -----------
BALANCE MARCH 31, 2000 .................... $ 65,203 $6,437,152 $ (588,742) $ (31,400) $ 5,882,213
========== ========== ========== ========== ===========
</TABLE>
<PAGE> 5
HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended March 31,
2000 1999
---- ----
<S> <C> <C>
Operating Activities
Net (loss) ................................................... $ (111,112) $ (33,642)
Adjustments to reconcile net loss to net cash used in
operating activities:
Deferred income taxes .................................. (42,400) --
Provision for loan losses .............................. 32,300 --
Depreciation and amortization .......................... 49,935 1,438
Net accretion on securities available for sale ......... (7,925) --
Change in year-end balances of:
Other assets ........................................... (152,768) --
Other liabilities ...................................... (97,038) 8,851
------------- -------------
Net cash (used in) operating activities ....... (329,008) (23,353)
------------- -------------
Investing Activities
Purchase of securities available for sale .................... (8,854,377) --
Net funding of loans ......................................... (3,359,687) --
Acquisition of property and equipment ........................ (43,974) (274,189)
------------- -------------
Net cash (used in) investing activities ....... (12,258,038) (274,189)
------------- -------------
Financing Activities
Net deposits ................................................. 10,109,880 --
Sale of common stock ......................................... -- 135,000
Offering costs ............................................... -- (13,337)
Draws under lines of credit .................................. -- 270,000
------------- -------------
Net cash provided by financing activities ..... 10,109,880 391,663
------------- -------------
Net increase (decrease) in cash and cash equivalents ......... (2,477,166) 94,121
Cash and cash equivalents:
Beginning of year .................................. 15,226,755 20,879
------------- -------------
End of quarter ..................................... $ 12,749,589 $ 115,000
============= =============
</TABLE>
<PAGE> 6
HEARTLAND BANCSHARES, INC
NOTES TO FINANCIAL STATEMENTS
Three Months Ended March 31, 2000
NOTE 1 - ORGANIZATION
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, 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 intercompany accounts and balances have been
eliminated.
NOTE 2 - BASIS OF PRESENTATION
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 three months ended March 31, 2000 may not be indicative
of the results that may be expected for the year ending December
31, 2000.
<PAGE> 7
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. Further discussion of 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> 8
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 $30.5 million at March
31, 2000. Below are the pertinent liquidity balances and ratios at March 31,
2000.
<TABLE>
<CAPTION>
AT
MARCH 31, 2000
--------------
<S> <C>
Cash and cash equivalents...................... $ 12,749,589
Securities available for sale.................. $ 11,966,385
CDs over $100,000 to total deposits ratio...... 14.1%
Loan to deposit ratio.......................... 27.9%
</TABLE>
Cash and cash equivalents are the primary source of liquidity. At
March 31, 2000, cash and cash equivalents amounted to $12.8 million,
representing 35.0% of total assets. Securities available for sale provide a
secondary source of liquidity. None of the $12 million in Heartland National
Bank's securities portfolio is scheduled to mature in 2000.
At March 31, 2000, large denomination certificates accounted for
14.1% 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 may 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> 9
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 into total assets. 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 March 31, 2000:
<TABLE>
<CAPTION>
MINIMUM
MARCH 31, REGULATORY
HEARTLAND NATIONAL BANK 2000 REQUIREMENT
- ----------------------- -------- -----------
<S> <C> <C>
Tier 1 Capital................................ 19.9% 4.00%
Total risk-based capital ratio................ 20.5% 8.00%
Leverage ratio................................ 16.5% 4.00%
HEARTLAND BANCSHARES - CONSOLIDATED
- -----------------------------------
Tier 1 Capital................................ 22.0% 4.00%
Total risk-based capital ratio................ 22.6% 8.00%
Leverage ratio................................ 17.8% 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.
<PAGE> 10
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 quarter ended March 31, 1999 to those for the quarter ended March 31, 2000
would not be meaningful. This discussion will therefore concentrate on results
of operations for the quarter ended March 31, 2000.
Net income (loss) for the quarter ended March 31, 2000 amounted to
$(111,112), or $(.17) 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 quarter ended March 31, 2000.
<TABLE>
<CAPTION>
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C>
Federal funds sold ................ $ 13,216 $ 191 5.79%
Securities ........................ 6,962 112 6.46%
Loans ............................. 6,582 168 10.26%
-------- -------- --------
Total ........................ $ 26,760 471 7.08%
========
Deposits .......................... $ 20,846 208 4.01%
======== ======== --------
Net interest income/spread ........ $ 263 3.07%
======== ========
Net yield on earning assets........ 3.95%
========
</TABLE>
(b) At December 31, 1999, the allowance for loan losses amounted
to $111,633. During the quarter ended March 31, 2000, an
additional $32,300 was provided to the allowance for loan
losses. There have been no charge-offs since the opening of
Heartland National Bank. As of March 31, 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
$23,295, or .07% of average assets, for the quarter ended
March 31, 2000.
<PAGE> 11
(d) Non-interest expense for the quarter ended March 31, 2000
amounted to $408,827. As a percent of total average assets,
non-interest expense amounted to 1.3%. The components of
non-interest expense for the quarter ended March 31, 2000 are
set forth below:
<TABLE>
<S> <C>
Salaries and benefits................................ $201,458
Occupancy expenses................................... 38,643
Equipment rentals, depreciation and maintenance...... 41,954
General operating expenses........................... 126,772
--------
Total non-interest expense.................. $408,827
========
</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.
<PAGE> 12
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 March 31, 2000.
<PAGE> 13
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.
<TABLE>
<S> <C>
Date: May 11, 2000 By: /s/ James C. Clinard
------------------------------------------------------------
James C. Clinard, President and Chief Executive Officer
(principal executive officer)
Date: May 11, 2000 By: /s/ David S. Lethem
------------------------------------------------------------
David S. Lethem, Chief Financial Officer
(principal financial and accounting officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HEARTLAND BANCSHARES, INC. FOR THE
THREE-MONTH PERIOD FROM JANUARY 1, 2000 THROUGH MARCH 31, 2000 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,515
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11,235
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 11,966
<INVESTMENTS-MARKET> 11,966
<LOANS> 8,501
<ALLOWANCE> (144)
<TOTAL-ASSETS> 36,402
<DEPOSITS> 30,504
<SHORT-TERM> 0
<LIABILITIES-OTHER> 16
<LONG-TERM> 0
0
0
<COMMON> 65
<OTHER-SE> 5,817
<TOTAL-LIABILITIES-AND-EQUITY> 5,882
<INTEREST-LOAN> 168
<INTEREST-INVEST> 112
<INTEREST-OTHER> 191
<INTEREST-TOTAL> 471
<INTEREST-DEPOSIT> 208
<INTEREST-EXPENSE> 208
<INTEREST-INCOME-NET> 263
<LOAN-LOSSES> 32
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 409
<INCOME-PRETAX> (154)
<INCOME-PRE-EXTRAORDINARY> (154)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (111)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
<YIELD-ACTUAL> 3.95
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 112
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 144
<ALLOWANCE-DOMESTIC> 144
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
