SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File No. 333-71773
HORIZON BANCORPORATION, INC.
- ----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 65-0840565
------------------------ -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
Suite C, 3005-26th Street West, Bradenton, Florida 34205
--------------------------------------------------------
(Address of Principal Executive Offices)
(941) 753-2265
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
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 preceding 12 months (or for such shorter period
that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number
of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Common stock, par value $.01 per share, 1,146,077 shares
issued and outstanding as of May 12, 2000.
Transitional Small Business Disclosure Format (Check one):
Yes N X
PART I
FINANCIAL INFORMATION
Item 1: Financial Statements.
Horizon Bancorporation, Inc.
Bradenton, Florida
Balance Sheets (Unaudited)
ASSETS
March 31, December 31,
2000 1999
---- ----
Cash and due from banks $ 928,430 $ 607,744
Federal funds sold 1,992,000 855,000
--------- ---------
Total cash and cash equivalents 2,920,430 1,462,744
Securities available for sale, at fair 177,900 177,900
value
Securities held to maturity, fair
market values of $987,710 and $487,800
at March 31, 2000 and December 31, 1,000,000 500,000
1999, respectively
Loans, net 7,245,071 3,828,043
Property and equipment, net 866,321 802,997
Other assets 85,210 75,153
---------- ---------
Total assets $12,294,932 $6,846,837
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Non-interest bearing deposits $ 1,342,966 $ 286,965
Interest bearing deposits 5,680,672 1,086,603
--------- ---------
Total deposits 7,023,638 1,373,568
Other liabilities 71,459 47,926
--------- ---------
$ 7,095,097 $ 1,421,494
--------- ---------
Commitments and contingencies
Common stock, $.01 par value,
25,000,000 shares authorized,
1,146,077 shares issued and $ 11,461 $ 11,461
outstanding
Paid-in-capital 5,992,278 5,992,278
Retained (deficit) (803,904) (578,396)
--------- ---------
Total Stockholders' Equity 5,199,835 5,425,343
Total Liabilities and
Stockholders' Equity $12,294,932 $6,846,837
========== =========
Refer to notes to the consolidated financial statements
Horizon Bancorporation, Inc.
Bradenton, Florida
Statements of Income (Unaudited)
For the three months
ended March 31,
2000 1999
Interest and fees on loans and $167,420 $11,505
investments
Interest expense 36,618 2,554
------- ------
Net interest income $130,802 $ 8,951
Provision for loan losses 75,000 - -
------- ------
Net interest income after provision for $ 55,802 $ 8,951
loan losses
Other income:
Service fees on deposit accounts $ 1,861 $ - -
Other income 174 - -
-------- ------
Total other income $ 2,035 $ - -
Operating Expenses:
Salaries/employee leasing $111,674 $31,259
Employee benefits 24,285 - -
Depreciation and amortization 33,298 - -
Organizational expenses - - 25,261
Legal and professional 25,917 - -
Insurance expense 3,123 2,177
Rent expense 3,975 2,290
Advertising & promotional 18,414 812
Miscellaneous other expenses 62,659 7,671
------- ------
Total operating expenses $283,345 $69,470
------- -------
Net income (loss) before taxes $(225,508) $(60,519)
Income taxes - - - -
-------- -------
Net (loss) $(225,508) $(60,519)
========= ========
Basic (loss) per share $ ( .20) $ (2.80)
========= ========
Diluted (loss) per share $ (.20) $ (2.80)
========= ========
Refer to notes to the consolidated financial statements.
Horizon Bancorporation, Inc.
Bradenton, Florida
Statements of Cash Flows (Unaudited)
For the three months
ended March 31,
2000 1999
Net cash used by operating activities $ (103,762) $ (73,286)
--------- ---------
Cash flows from investing activities:
Increase in loans (3,492,028) - -
Purchase of securities held to maturity (500,000) - -
Purchase of fixed assets (96,594) (40,424)
---------- ---------
Net cash used in investing activities $(4,088,622) $ (40,424)
---------- ---------
Cash flows from financing activities:
Increase in deposits $ 5,650,070 $ - -
Increase in borrowings - - 103,750
---------- ---------
Net cash provided by financing
activities $ 5,650,070 $ 103,750
----------- ----------
Net increase in cash and cash
equivalents $ 1,457,686 $ (9,960)
Cash and cash equivalents, beginning of 1,462,744 28,799
period
--------- --------
Cash and cash equivalents, end of period $2,920,430 $ 18,839
========== =========
Refer to notes to the consolidated financial statements
Horizon Bancorporation, Inc.
Bradenton, Florida
Consolidated Statements of Changes in Shareholders' Equity
(Unaudited)
for the three-month periods ended March 31, 1999 and 2000
Common Stock Accumulated
------------ Paid Other
Par in Retained Comprehensive
Shares Value Capital Earnings Income Total
------ ----- ------- -------- ------------- -----
Balance, $21,600 $216 $128,784 $(111,530) - - $17,470
December 31,
1998
Comprehensive
Income:
- -------------
Net Income
(loss), three-
month period
ended March
31, 1999 - - - - - - (60,519) - - (60,519)
Net unrealized
(losses) or
securities,
three-month
period ended
March 31, 1999 - - - - - - - - - - - -
------- ---- ------- -------- ------ --------
Balance, March
31, 1999 $21,600 $216 $128,784 $(172,048) - - $(43,048)
======= ==== ======== ======== ====== ========
Balance,
December 31,
1999 $1,146,077 $11,461 $5,992,278 $(478,396) - - $5,425,343
---------- ------- ---------- ---------- ---- ----------
Comprehensive
Income:
- ------------
Net Income
(loss), three-
month period
ended March
31, 2000 - - - - - - (225,508) - - (225,508)
Net unrealized
(losses) or
securities,
three-month
period ended
March 31, 2000 - - - - - - - - - - - -
Balance
March 31, 2000 $1,146,077 $11,461 $5,992,278 $(803,904) - - $5,199,835
Refer to notes to the consolidated financial statements.
Horizon Bancorporation, Inc.
Notes to Consolidated Financial Statements (Unaudited)
March 31, 2000
Note 1 - Basis of Presentation
---------------------
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all 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 accruals)
considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 2000
are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. These statements
should be read in conjunction with the consolidated financial
statements and footnotes thereto included in the Annual Report on
Form 10-KSB for the year ended December 31, 1999.
Note 2 - Summary of Organization
-----------------------
Manasota Group, Inc. ("Manasota) was incorporated on May 27,
1998 for the purpose of becoming a bank holding company with
respect to a proposed de novo bank, Horizon Bank (the "Bank") to
be located in Bradenton, Florida. Manasota was later renamed
Horizon Bancorporation, Inc., Bradenton, Florida (the "Company").
Accordingly, all financial transactions undertaken by Manasota
are reflected in the Company's financial statements as of March
31, 2000 and all other prior periods. In a public offering of
its shares conducted during 1999, the Company raised
approximately $6.0 million, net of selling expenses, by selling
1,146,077 shares of its common stock. The Company invested $5.3
million in its sole subsidiary, Horizon Bank, Bradenton, Florida
(the "Bank"), and kept the remaining funds for working capital and
future corporate purposes. Banking operation commenced on
October 25, 1999, when the Bank opened for business.
The Company is authorized to issue up to 25.0 million shares
of its $.01 par value per share common stock. Each share is
entitled to one vote and shareholders have no preemptive or
conversion rights. As of March 31, 2000, and December 31, 1999,
there were 1,146,077 shares of the Company's common stock issued
and outstanding. Additionally, the Company has authorized the
issuance of up to 1.0 million shares of its $.01 par value per
share preferred stock. The Company's Board of Directors may, with-
out further action by the shareholders, direct the issuance of
preferred stock for any proper corporate purpose with preferences,
voting powers, conversion rights, qualifications, special or relative
rights and privileges which could adversely affect the voting
power or other rights of shareholders of common stock. As of
March 31, 2000 and December 31, 1999, there were no shares of the
Company's preferred stock issued or outstanding. The Company's
Articles of Incorporation and Bylaws contain certain provisions
that might be deemed to have potential defensive "anti-takeover"
effect. These certain provisions are more fully described in
the Annual Report on Form 10-KSB for the year ended December 31,
1999.
Note 3 - Recent Accounting Pronouncements
--------------------------------
In March, 1998, the American Institute of Certified Public
Accountants issued Statement of position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." SOP 98-1 provides guidance for
capitalizing and expensing the costs of computer software
developed or obtained for internal use. SOP 98-1 is effective
for financial statements for fiscal years beginning after
December 15, 1998. The adoption of SOP 98-1 did not have a
material impact on the accompanying consolidated financial
statements.
SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued in June, 1998, and is effective for
all calendar-year entities beginning in January, 2000. This
Statement applies to all entities and requires that all
derivatives be recognized as assets or liabilities in the balance
sheet, at fair values. Gains and losses of derivative
instruments not designated as hedges will be recognized in the
income statement. Since the Company does not invest in
derivative instruments, the adoption of SFAS No. 133 does not
have a material impact on the financial statements.
SFAS No. 134, "Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale
by a Mortgage Banking Enterprise" amends prior accounting
standards, primarily SPAS 65, with respect to the classification
of retained interests, such as mortgage-backed securities,
following a securitization of mortgage loans held for sale. This
statement became effective in the first quarter of 1999. Since
the Company does not securitize mortgage loans, no financial
statement impact has resulted from adapting this statement.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Total assets increased by $5.5 million to $12.3 million
during the three-month period ended March 31, 2000. More
specifically, cash and cash equivalents increased by $1.5 million
to $2.9 million, securities increased by $.5 million to $1.2
million, and loans increased by $3.5 million to $7.2 million.
Liquidity and Sources of Capital
Liquidity is the Company's ability to meet all deposit
withdrawals immediately, while also providing for the credit
needs of customers. The March 31, 2000, financial statements
evidence a satisfactory liquidity position as total cash and cash
equivalents amounted to $2.9 million representing 23.7% of total
assets. Investment securities, which amounted to $1.2 million or
9.6% of total assets, provide a secondary source of liquidity
because they can be converted into cash in a timely manner. The
Bank is a member of the Federal Reserve System and maintains
relationships with several correspondent banks and, thus, could
obtain funds from these banks on short notice. The Company's
management closely monitors and maintains appropriate levels of
interest earning assets and interest bearing liabilities, so that
maturities of assets can provide adequate funds to meet customer
withdrawals and loan demand. The Company knows of no trends,
demands, commitments, events or uncertainties that will result in
or are reasonably likely to result in its liquidity increasing or
decreasing in any material way. The Bank maintains an adequate
level of capitalization as measured by the following capital
ratios and the respective minimum capital requirements by the
Bank's primary regulator:
Banks Minimum Regulatory
March 31, 2000 Requirement
-------------- ------------------
Leverage ratio 50.6% 4.0%
Risk weighted ratio 54.0% 8.0%
With respect to the leverage ratio, the regulators expect a
minimum of 5.0% to 6.0% ratio for banks that are not rated CAMEL
1. The Bank's leverage ratio of 50.6% is well above the required
minimum.
Results of Operations
- ---------------------
Net loss for the three-month period ended March 31, 2000
amounted to $(225,508), or $(.20) per diluted share. For the
three-month period ended March 31, 1999, net loss amounted to
$(60,519), or $(2.80) per diluted share. Recall that principal
operations commenced on October 25, 1999 and that from that point
on the Bank was fully staffed and expenses were significantly
higher than those incurred prior to commencement of principal
operations. The Registrant therefore believes that comparing pre-
opening to post opening periods could be misleading and thus
should be avoided. Below is a brief discussion concerning the
Company's operational results for the three-month period ended
March 31, 2000:
a. Net interest income, which represents the difference
between interest received on interest earning assets and interest
paid on interest bearing liabilities, amounted to $167,420.
The net interest yield, defined as net interest income
divided by average interest earning assets, amounted to 6.81%.
The Company's yield an earning assets amounted to 8.73%, and the
cost of funds amounted to 5.21%, resulting in an interest margin
of 3.52%. Below is pertinent information concerning the yield on
earning assets and the cost of funds for the three-month period
ended March 31, 2000:
(Dollars in '000s)
Avg. Assets/ Interest Yield/
Description Liabilities Income/Expense Cost
- ----------- ----------- -------------- ----
Federal funds $1,299 $ 19 5.85%
Securities 700 11 6.28%
Loans 5,697 138 9.69%
------ --- -----
Total $ 7,696 $ 168 8.73%
===== === =====
Transactional accounts $ 1,349 $ 13 3.85%
Savings 91 1 3.07%
CD's 1,402 23 6.56%
----- -- -----
Total $2,842 $ 37 5.21%
====== ===== =====
Net interest income $ 131
=====
Net yield on earning 6.81%
assets =====
b. For the three-month period ended March 31, 2000, non-
interest income amounted to $2,035, or .08% of average assets.
Because the Bank is new and in need of deposits, its strategy is
to attract deposits by charging little for services. In effect,
it passes on the savings to its customers rather than pay for an
expensive marketing campaign to increase deposits.
c. For the three-month period ended March 31, 2000, non-
interest expense amounted to $293,345, or 13.12% of average
assets. While non-interest expense as a percent of average
assets is high, it is expected to decline as economies of scale
are attained. Also, as the Bank grows, fixed costs as a percent
of total assets will decline.
During the three-month period ended March 31, 2000, the
allowance for loan losses has grown by $75,000 to $175,000. The
allowance for loan losses as a percentage of gross loans
decreased from 2.54% at December 31, 1999, to 2.36% at March 31,
2000. Management considers the allowance for loan losses to be
adequate and sufficient to absorb possible 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.
The Company is not aware of any current recommendation by
the regulatory authorities which, if it was to be implemented,
would have a material effect an the Company's liquidity, capital
resources, or results of operations.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material pending legal proceedings to which
the Company or the Bank is a party or of which any of their
property is the subject.
Item 2. Changes in Securities.
(a) None.
(b) None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits:
27 Financial Data Schedule
B. Reports on Form 8-K
There were no reports on Form 8-K filed during the
quarter ended March 31, 2000.
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.
HORIZON BANCORPORATION, INC.
(Registrant)
Date: May 12, 2000 BY: /S/ Charles S. Conoley
-----------------------
Charles S. Conoley
President, Chief Executive Officer
(Principal Executive, Financial
and Accounting Officer)
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 928,430
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,992,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 177,900
<INVESTMENTS-CARRYING> 1,000,000
<INVESTMENTS-MARKET> 987,710
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<ALLOWANCE> 175,000
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<SHORT-TERM> 0
<LIABILITIES-OTHER> 71,459
<LONG-TERM> 0
0
0
<COMMON> 11,461
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<INTEREST-INVEST> 30,590
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<INTEREST-TOTAL> 167,420
<INTEREST-DEPOSIT> 36,618
<INTEREST-EXPENSE> 36,618
<INTEREST-INCOME-NET> 130,802
<LOAN-LOSSES> 75,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 283,345
<INCOME-PRETAX> (225,508)
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<ALLOWANCE-OPEN> 100,000
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