<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:
June 30, 2000 333-67107
HEARTLAND BANCSHARES, INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
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:
<TABLE>
<S> <C>
Common Stock, $0.10 par value 652,030
Class Outstanding as of July 25, 2000
</TABLE>
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>
<CAPTION>
ASSETS June 30, 2000 December 31, 1999
------ ------------- -----------------
<S> <C> <C>
Cash and due from banks $ 1,547,764 $ 1,640,755
Federal funds sold 13,972,000 13,586,000
------------ ------------
Total cash and cash equivalents 15,519,764 15,226,755
Securities available for sale 15,799,489 3,136,468
Loans:
Commercial, financial and agricultural 7,355,798 3,521,046
Real estate - mortgage 689,061 863,371
Installment and consumer loans 2,735,721 756,748
------------ ------------
Total loans 10,780,580 5,141,165
Less: Allowance for loan losses (151,279) (111,633)
------------ ------------
Net loans 10,629,301 5,029,532
Property and equipment 2,744,782 2,767,509
Other assets 691,195 341,466
------------ ------------
TOTAL ASSETS $ 45,384,531 $ 26,501,730
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non interest bearing demand $ 7,383,866 $ 3,166,211
Savings, NOW, and money market 19,642,408 10,174,983
Time deposits under $100,000 7,057,084 3,676,694
Time deposits over $100,000 5,359,000 3,376,000
------------ ------------
Total deposits 39,442,358 20,393,888
Short term borrowing -- --
Other liabilities 121,699 92,702
------------ ------------
Total Liabilities 39,564,057 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) (656,639) (477,690)
Accumulated other comprehensive income (loss)
SFAS 115 (25,242) (9,525)
------------ ------------
Total Shareholders' Equity 5,820,474 6,015,140
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 45,384,531 $ 26,501,730
============ ============
</TABLE>
<PAGE> 3
HEARTLAND BANCSHARES, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
---------- --------
<S> <C> <C>
Interest income
Interest and fees on loans $ 403,755 $ --
Interest on securities (escrow acct) 351,762 42,863
Interest on federal funds sold 383,897 --
---------- --------
Total interest income 1,139,414 42,863
---------- --------
Interest expense
Interest on deposits 506,938 --
Interest on short term borrowing -- 13,470
---------- --------
Total interest expense 506,938 13,470
---------- --------
Net interest income 632,476 29,393
Provision for loan losses 39,599 --
---------- --------
Net interest income (expense)
after provision for loan losses 592,877 29,393
---------- --------
Noninterest income
Service charges and fees 38,080 --
Other income 13,086 10,450
---------- --------
Total noninterest income 51,166 10,450
---------- --------
Noninterest expense
Salaries and employee benefits 407,822 66,216
Occupancy expenses 74,338 --
Equipment expenses 87,548 --
Other operating expenses 318,184 30,209
---------- --------
Total noninterest expense 887,892 96,425
---------- --------
Loss before income taxes (243,849) (56,582)
Income tax benefit (64,900) --
NET LOSS $ (178,949) $(56,582)
========== ========
NET LOSS PER SHARE $ (0.28) $ (4.32)
========== ========
Average shares outstanding 652,030 13,105
========== ========
</TABLE>
<PAGE> 4
HEARTLAND BANCSHARES, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended June 30,
2000 1999
---------- --------
<S> <C> <C>
Interest income
Interest and fees on loans $ 235,534 $ --
Interest on securities (escrow acct) 239,298 --
Interest on federal funds sold 192,750 --
----------- --------
Total interest income 667,582 --
----------- --------
Interest expense
Interest on deposits 299,426 --
Interest on short term borrowing -- --
----------- --------
Total interest expense 299,426 --
----------- --------
Net interest income 368,156 --
Provision for loan losses 7,299 --
----------- --------
Net interest income (expense)
after provision for loan losses 360,857 --
----------- --------
Noninterest income
Service charges and fees 20,913 --
Other income 6,958 42,863
----------- --------
Total noninterest income 27,871 42,863
----------- --------
Noninterest expense
Salaries and employee benefits 206,364 48,851
Occupancy expenses 35,695 --
Equipment expenses 45,594 --
Other operating expenses 191,412 17,352
----------- --------
Total noninterest expense 479,065 65,803
----------- --------
Loss before income taxes (90,337) (22,940)
Income tax benefit (22,500) --
NET LOSS $ (67,837) $(22,940)
=========== ========
NET LOSS PER SHARE $ (0.10) $ (1.58)
=========== ========
Average shares outstanding 652,030 14,500
=========== ========
</TABLE>
<PAGE> 5
HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
------------ -----------
<S> <C> <C>
Operating Activities
Net (loss) $ (178,949) $ (56,582)
Adjustments to reconcile net loss to net cash used in
operating activities:
Deferred income taxes (64,900) --
Provision for loan losses 39,599 --
Depreciation and amortization 97,710 2,875
Net accretion on securities available for sale 1,405 --
Change in year-end balances of:
Other assets (264,319) --
Other liabilities 8,997 (2,044)
------------ -----------
Net cash used in operating activities (360,457) (55,751)
------------ -----------
Investing Activities
Purchase of securities available for sale (12,687,481) --
Restricted Cash and Cash Equivalents -- (6,226,663)
Net funding of loans (5,632,539) --
Acquisition of property and equipment (74,982) (740,210)
------------ -----------
Net cash used in investing activities (18,395,002) (6,966,873)
------------ -----------
Financing Activities
Net deposits 19,048,470 --
Sale of common stock -- 135,000
Escrow Liability -- 6,183,800
Offering costs -- (15,607)
Draws under lines of credit -- 745,000
------------ -----------
Net cash provided by financing activities 19,048,470 7,048,193
------------ -----------
Net increase in cash and cash equivalents 293,011 25,569
Cash and cash equivalents:
Beginning balance 15,226,755 20,879
------------ -----------
Ending balance $ 15,519,766 $ 46,448
============ ===========
</TABLE>
<PAGE> 6
HEARTLAND BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Six Months Ended June 30, 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 1,350 133,650 -- -- 135,000
stock at $10.00 per share
Net loss for the six months ended -- -- (56,582) -- (56,582)
6/30/1999
------- ---------- --------- -------- -----------
BALANCE JUNE 30, 1999 $ 1,450 $ 143,550 $(149,001) $ -- $ (4,001)
======= ========== ========= ======== ===========
BALANCE DECEMBER 31, 1999 $65,203 $6,437,152 $(477,690) $ (9,525) $ 6,015,140
Comprehensive Income:
Net loss for the six months ended -- -- (178,949) -- $ (178,949)
6/30/2000
Other comprehensive income:
Change in unrealized loss
on securities available for sale -- -- -- (15,717) (15,717)
Total comprehensive income (loss) -- -- -- -- $ (194,666)
------- ---------- --------- -------- -----------
BALANCE JUNE 30, 2000 $65,203 $6,437,152 $(656,639) $(25,242) $ 5,820,474
======= ========== ========= ======== ===========
</TABLE>
<PAGE> 7
HEARTLAND BANCSHARES, INC
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 2000
NOTE 1 - ORGANIZATION
Organization:
Heartland Bancshares, Inc. (the Company) is a Florida corporation with
headquarters in Sebring, Florida. The Company was formed to organize
and own 100% of the capital stock of Heartland National Bank (the
Bank). The Bank is a nationally chartered full service institution
with an office in Sebring, Florida, and an office in Lake Placid,
Florida. The Bank opened for business on September 7, 1999.
The accompanying consolidated financial statements include the
accounts of the Company and the Bank. All significant inter-company
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 the Company's financial results have been made.
Operating results for the six months ended June 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 $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
-------------
<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
<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 June 30, 2000:
<TABLE>
<CAPTION>
MINIMUM
JUNE 30, REGULATORY
HEARTLAND NATIONAL BANK 2000 REQUIREMENT
----------------------- ------- -----------
<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.
<PAGE> 11
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
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%
------- ---- -----
Total $35,852 $668 7.46%
======= ==== =====
Deposits $35,266 $299 3.40%
======= ==== =====
Net interest income $369 4.06%
==== =====
Net yield earning assets 4.12%
=====
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
June 30, 2000
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%
------- ---- -----
Total $35,852 $668 7.46%
======= ==== =====
Deposits $35,266 $299 3.40%
======= ==== =====
Net interest income $369 4.06%
==== =====
Net yield earning assets 4.12%
=====
</TABLE>
<PAGE> 12
(b) At March 31, 2000, the allowance for loan losses amounted to
$143,933. During the quarter ended June 30, 2000, an
additional $7,346 was provided to the allowance for loan
losses. There have been charge-offs of $2,654 since the
opening of Heartland National Bank. 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
------------- -------------
<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
-------- --------
Total non-interest expense $887,892 $479,125
======== ========
</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 4. Submission of Matters to a Vote of Security Holders
The 2000 Annual Meeting of Shareholders of Heartland Bancshares was
held on April 20, 2000. The following table sets forth the name of each
individual elected at the 2000 Annual Meeting and the results of voting with
respect to each director:
<TABLE>
<CAPTION>
Votes
Director For Withheld
-------- ------- --------
<S> <C> <C>
James B. Belflower................. 406,900 0
James C. Clinard................... 406,900 0
Bert J. Harris, III................ 406,900 0
Issac G. Nagib..................... 406,900 0
S. Allen Skipper................... 406,900 0
Malcolm C. Watters, Jr............. 406,900 0
</TABLE>
The term of each of the following directors of Heartland Bancshares
continued after the 2000 Annual Meting: William R. Grigsby, William R. Handley,
Edward L. Smoak and Lawrence B. Wells. The shareholders of Heartland Bancshares
also voted to approve the Heartland Bancshares, Inc. 1999 Stock Option Plan,
with 394,300 votes cast in favor of adoption of the Plan and 12,600 votes cast
against adoption of the Plan. No other matters were submitted to a vote of the
shareholders at the 2000 Annual Meeting.
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 June 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: August 11, 2000 By: /s/ James C. Clinard
-----------------------------------
James C. Clinard, President and Chief
Executive Officer (principal executive
officer)
Date: August 11, 2000 By: /s/ Janice T. Walker
----------------------------------------------
Janice T. Walker, Chief Financial Officer
(principal financial and accounting officer)
