HORIZON BANCORP
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
450 5th Street N.W.
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996 commission file number 0-10792
HORIZON BANCORP
(Exact name of registrant as specified in its charter)
Indiana 35-1562417
(State or other jurisdiction of incorporation or (I.R. S.
Employer Identification No.) organization)
515 Franklin Square, Michigan City, Indiana 46360
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 879-0211
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value (Title of class) Indicate by check mark whether the
Registrant (1) has 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 Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
747,983 at March 31, 1996
<PAGE>
HORIZON BANCORP
FORM 10-Q
Part I - Financial Information
ITEM 1. FINANCIAL INFORMATION REQUIRED BY RULE 10-01 OF REGULATION S-X IS
INCLUDED IN THIS FORM 10-Q AS REFERENCED BELOW
Financial Statements Page
Consolidated Balance Sheet (Unaudited) 1
Consolidated Statement of Income (Unaudited) 2
Condensed Consolidated Statement of Changes 3
in Stockholders' Equity (Unaudited)
Consolidated Statement of Cash Flows (Unaudited) 4
Notes to the Consolidated Financial Statements (Unaudited) 5 - 12
<PAGE>
Consolidated Balance Sheet (Thousands) (Unaudited)
March 31 December 31
1996 1995
---- ----
ASSETS
Cash and cash equivalents
Cash and due from banks $ 15,505 $ 20,987
Money market investment 975 1,079
Federal funds sold 0 0
--------- ---------
Total cash and cash equivalents 16,480 22,066
========= =========
Short-term investments-Interest-bearing balances 206 206
Investment securities available for sale,
net (Note 2) 67,108 74,942
Investment securities held to maturity,(Note 2)
Estimated market value of $11,470
March 31, 1996 and $12,202 December 31,1995) 11,459 12,167
Total loans (Note 3) 246,588 241,662
Allowance for loan losses (Note 4) (2,761) (2,777)
--------- ---------
Net loans 243,827 238,885
Premises and equipment, net 11,203 11,027
Accrued interest receivable 2,885 2,900
Other assets 5,974 5,820
--------- ---------
Total assets $ 359,142 $ 368,013
========= =========
LIABILITIES
Deposits
Noninterest-bearing $ 33,283 $ 45,479
Interest-bearing 250,809 243,505
--------- ---------
Total deposits 284,092 288,984
Short-term borrowings 13,529 21,569
Federal Home Loan Bank Advances 25,400 21,400
Accrued interest payable 650 567
Other liabilities 2,883 3,122
--------- ---------
Total liabilities 326,554 335,642
========= =========
Commitments and contingencies
Equity received from contributions and
dividends to the ESOP 3,981 3,818
STOCKHOLDERS' EQUITY
Common stock: $1 stated value, 5,000,000
shares authorized and 1,027,531 shares issued 732 732
Additional paid-in capital 9,238 9,238
Retained earnings 21,713 21,105
Unrealized gain/loss on securities
available for sale (net of tax) (20) 466
Less treasury stock, at cost - 117,063
shares at March 31, 1996 and 93,745 shares at
December 31, 1995 (3,056) (2,988)
--------- ---------
Total stockholders' equity 28,607 28,553
--------- ---------
Total liabilities and stockholder's equity $ 359,142 $ 368,013
========= =========
See notes to the consolidated financial statements.
<PAGE>
Consolidated Statements of Income (Thousands) (Unaudited)
For the quarters ended
March 31 March 31
1996 1995
---- ----
INTEREST INCOME
Interest and fees on loans $5,476 $ 4,805
Interest and dividends on investments
Taxable 1,272 1,423
Nontaxable 88 143
------ -------
Total interest income 6,836 6,371
INTEREST EXPENSE
Interest on deposits (Note 9) 2,278 2,185
Interest on Federal funds purchased and
securities sold under agreements to repurchase 172 245
Interest on Federal Home Loan Bank advances 316 227
------ -------
Total interest expense 2,766 2,657
NET INTEREST INCOME 4,070 3,714
PROVISION FOR LOAN LOSSES (Note 5)
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,070 3,714
NONINTEREST INCOME
Service charges on deposits 374 335
Trust department income (Note 1) 510 417
Interest on Federal income tax refund 298
Other income 104 57
------ -------
Total noninterest income 988 1,107
NONINTEREST EXPENSE
Salaries and employee benefits (Notes 11 and 12) 1,967 1,950
Occupancy expense of Company premises,
net of rental income 279 262
Data processing and equipment expenses 473 388
Loss on other real estate owned 44 61
Other expenses (Note 13) 1,021 1,043
------ -------
Total noninterest expense 3,784 3,704
INCOME BEFORE INCOME TAXES 1,274 1,117
PROVISION FOR INCOME TAXES (notes 1 and 14) 405 (381)
------ -------
NET INCOME $ 869 $ 1,498
====== =======
Earnings per common share (Note 1) $ 1.16 $ 1.97
See notes to the consolidated financial statements.
<PAGE>
Condensed Consolidated Statements of Changes in Stockholders'
Equity (Unaudited)
(In thousands)
Three Months Ended March 31 1996 1995
- --------------------------- ---- ----
Balance, beginning of period $ 28,553 $ 24,361
Net income 869 1,498
Cash dividends ($.35 for the three
months ended March 31, 1996 and $.30 for
the three months ended March 31, 1995) (261) (280)
Purchase of Treasury Stock (68) (131)
Change in unrealized gain (loss) on
securities available for sale (486) 1,014
-------- --------
Balance, March 31 $ 28,607 $ 26,462
======== ========
See notes to the consolidated financial statements.
<PAGE>
Consolidated Statements of Cash Flows (Thousands)
For the quarters ended March 31 March 31
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 869 $ 1,498
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation 245 207
Net (accretion)/amortization 100 39
Additional paid in capital from release of ESOP shares . 31 62
Loss on disposal of fixed assets 1 2
Loss on other real estate owned 24
Provision for/(Benefit of) deferred taxes 206 380
Change in deferred loan fees 1 3
Change in unearned income 51 (76)
Change in interest receivable 15 135
Change in interest payable 83 99
Change in other assets 138 (221)
Change in other liabilities (239) (206)
-------- --------
Net cash provided by operating activities 1,501 1,946
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities, calls and principal
repayments of investment securities-available for sale 6,887 1,799
Proceeds from maturities, calls and principal
repayments of investment securities-held to maturity . 973 160
Purchase of investment securities-held to maturity (269) (2,303)
Change in loans (4,831) 3,783
Purchase of loans (225) (746)
Proceeds from sales of loans 353
Recoveries on loans previously charged off 62 112
Premises and equipment expenditures (422) (419)
Proceeds from disposal of premises and equipment 11
-------- --------
Net cash provided by (used in) investing activities 2,175 2,750
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase/(decrease) in deposits (4,892) (15,859)
Dividends paid (262) (280)
Change in short-term borrowings (8,040) (437)
Purchase of treasury stock (68) (131)
Change in Federal Home Loan Bank advance 4,000 (2,900)
-------- --------
Net cash provided by (used in) financing activities (9,262) (19,607)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (5,586) (14,911)
-------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 22,066 28,134
-------- --------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 16,480 $ 13,223
-------- --------
CASH PAID/(RECEIVED) DURING THE YEAR FOR:
Interest 2,683 2,558
Income taxes 100 375
See notes to the consolidated financial statements.
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Horizon Bancorp ("Horizon") and its wholly-owned subsidiary, First Citizens
Bank, N.A. ("Bank"). All intercompany balances and transactions have been
eliminated. The results of operations for the period ended March 31, 1996 and
March 31, 1995 are not necessarily indicative of the operating results for the
full year of 1996 or 1995. These interim financial statements are prepared
without audit and reflect all adjustments (consisting of normal recurring
adjustments) which, in the opinion of management, are necessary to present
fairly the consolidated position of Horizon Bancorp at March 31, 1996 and its
results of operations and cash flows for the periods presented. The accompanying
consolidated financial statements do not purport to contain all the necessary
financial disclosure required by generally accepted accounting principals that
might otherwise be necessary in the circumstances and should be read in
conjunction with the 1995 Horizon Bancorp consolidated financial statements and
related notes thereto included in its Annual Report for the year ended December
31, 1995.
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2 - INVESTMENT SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY
The amortized cost and estimated fair value of investment securities
available for sale and held to maturity are as follows:
<TABLE>
<CAPTION>
(Thousands) Gross Gross
Amortized unrealized unrealized
Cost gains losses Fair Value
---- ----- ------ ----------
AVAILABLE FOR SALE AT MARCH 31, 1996:
<S> <C> <C> <C> <C>
U. S. Treasury and U. S. Government agency securities $ 5,010 $ 7 $ $ 5,017
Other securities 1,039 (12) 1,027
------- ---- ---- -------
Subtotal 6,049 7 (12) 6,044
GNMA 8,573 88 (61) 8,600
FHLMC 19,741 218 (114) 19,845
FNMA 29,581 79 (161) 29,499
------- ---- ---- -------
Total mortgage-backed securities 57,895 385 (336) 57,944
Total debt securities 63,944 392 (348) 63,988
Equity securities 3,235 (115) 3,120
------- ---- ---- -------
Total investment securities available for sale $67,179 $392 $463) $67,108
======= ==== ==== =======
HELD TO MATURITY AT MARCH 31, 1996:
U. S. Government agency securities 3,085 3,086
Obligations of states and political subdivisions 8,373 35 (24) 8,384
------- ---- ---- -------
Total debt securities held to maturity $11,459 $ 35 $(24) $11,470
======= ==== ==== =======
AVAILABLE FOR SALE AT DECEMBER 31 1995:
U. S. Treasury and U. S. Government agency securities $ 7,165 $ 16 $ $ 7,181
Other securities 1,046 (8) 1,038
------- ---- ---- -------
Subtotal 8,211 16 (8) 8,219
GNMA 9,061 154 (8) 9,207
FHLMC 21,165 395 (9) 21,551
FNMA 32,491 374 (19) 32,846
------- ---- ---- -------
Total mortgage-backed securities 62,717 923 (36) 63,604
Total debt securities 70,928 939 (44) 71,823
Equity securities 3,235 (116) 3,119
------- ---- ---- -------
Total investment securities available for sale $74,163 $939 $160) $74,942
======= ==== ==== =======
HELD TO MATURITY AT DECEMBER 31, 1995:
U. S. Government agency securities $ 3,164 2 3,166
Obligations of states and political subdivisions 9,003 55 (22) 9,036
------- ---- ---- -------
Total debt securities held to maturity $12,167 $ 57 $(22) $12,202
======= ==== ==== =======
</TABLE>
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2 - INVESTMENT SECURITIES AVAILABLE FOR SALE AND HELD TO MATURITY
(CONTINUED)
The amortized cost and estimated fair value of debt securities at March 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
(Thousands) Amortized Fair
Cost Value
AVAILABLE FOR SALE:
Due in one year or less $ 4,007 $ 4,008
Due after one year through five years 2,042 2,035
------- -------
Subtotal 6,049 6,043
Mortgage-backed securities 57,895 57,944
------- -------
Total debt securities available for sale $63,944 $63,987
======= =======
HELD TO MATURITY:
Due in one year or less $ 3,244 $ 3,242
Due after one year through five years 6,853 6,868
Due after five years through ten years 1,169 1,166
Due after ten years 193 193
------- -------
Total debt securities held to maturity $11,459 $11,469
======= =======
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 3 - TOTAL LOANS
Total loans are comprised of the following classifications:
(In Thousands)
March 31 December 31
1996 1995
---- ----
Commercial $ 65,179 $ 66,125
Real estate mortgage 122,972 119,739
Installment 58,437 55,798
-------- --------
Total Loans $246,588 $241,662
======== ========
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
The following is an analysis of the activity in the allowance for loan losses
account:
(In Thousands)
March 31 December 31
1996 1995
---- ----
Balance, beginning of period $ 2,777 $ 2,555
Recoveries 62 515
Loan charge-offs $ (78) $ (293)
------- -------
Balance, end of period $ 2,761 $ 2,777
======= =======
NOTE 5 - NONPERFORMING ASSETS:
The following is a summary of nonperforming loans and Other Real Estate Owned
(OREO). OREO is presented before the allowance for OREO losses:
(In Thousands)
March 31 December 31
1996 1995
---- ----
Nonperforming Loans $1,040 $3,909
OREO before allowance for OREO losses 4,087 4,193
----- -----
Total nonperforming assets $9,683 $8,102
====== ======
The following is an analysis of the activity in the allowance for OREO account:
(In Thousands)
March 31 December 31
1996 1995
---- ----
Balance, beginning of period $ 1,075 $ 1,801
Losses on OREO charged to expense 48
Losses charged to allowance (24) (774)
------- -------
Balance, end of period $ 1,051 $ 1,075
======= =======
Horizon adopted Statement of Financial Accounting Standards FAS 114 "Accounting
by Creditors for Impairment of a Loan" as of January 1, 1995. At March 31, 1996
there were no impaired loans outstanding.
<PAGE>
FOR THE QUARTER ENDED MARCH 31, 1996
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The purpose of this discussion is to focus on Horizon's financial condition,
changes in financial condition and the results of operations in order to provide
a better understanding of the consolidated financial statements included
elsewhere herein. This discussion should be read in conjunction with the
consolidated financial statements and the related notes.
FINANCIAL CONDITION
LIQUIDITY
The Bank maintains a stable base of core deposits provided by long standing
relationships with consumers and local businesses. These deposits are the
principal source of liquidity for Horizon. Other sources of liquidity for
Horizon include earnings, loan repayment, investment security sales and
maturities, sale of real estate loans and borrowing relationships with
correspondent banks, including the Federal Home Loan Bank (FHLB). During the
first quarter of 1996, cash flows were generated from earnings of $869 thousand,
a $8 thousand decrease in investment securities and a $4 million increase in
borrowings with FHLB. Cash flows were used for a $5 million increase in loan
demand, a $5 million decrease in deposits and an $8 million reduction in short
term borrowings. The net cash position decreased $5 million, primarily in cash
and due from banks and Federal funds sold. In addition to liquidity provided
from the normal operating, funding and investing activities of Horizon, at March
31, 1996, Bank has available approximately $37.5 million in unused credit lines
with various money center banks.
There have been no other material changes in the liquidity of Horizon from
December 31, 1995 to March 31, 1996.
<PAGE>
FOR THE QUARTER ENDED MARCH 31, 1996
CAPITAL RESOURCES
The capital resources of Horizon and Bank remain strong and exceed regulatory
capital ratios for "well capitalized" banks at March 31, 1996. Stockholders'
equity totaled $32.588 million ($3.981 million from ESOP) as of March 31, 1996
compared to $32.371 million ($3.818 million from ESOP) as of December 31, 1995.
The increase in stockholders' equity during the first quarter of 1996 is the
result of the increase in the market value of investment securities available
for sale accounted for as an addition/reduction of stockholders' equity and net
income, net of dividends paid. At March 31, 1996, the ratio of stockholders'
equity to assets was 9.07% compared to 8.80% for 1995. Horizon increased its
quarterly dividend from $.30 to $.35 per share in April 1996.
Horizon has selectively purchased shares that became available in the market
from time to time. During the first quarter of 1996, management purchased 1,756
shares at a cost of $68 thousand.
There have been no other material changes in Horizon's capital resources
from December 31, 1995 to March 31, 1996.
MATERIAL CHANGES IN FINANCIAL CONDITION - MARCH 31, 1996 COMPARED TO DECEMBER
31, 1995
Because of the nature of its activities, Horizon is subject to pending and
threatened legal actions that arise in the normal course of business. In
management's opinion, after consultation with counsel, none of the litigation to
which Horizon or any of its subsidiaries is a party will have a material effect
on the consolidated financial position or results of operations of Horizon.
FOR THE QUARTER ENDED MARCH 31, 1996
Horizon's noninterest-bearing deposits declined to $33.3 million at March 31,
1996 compared to $45.5 million at December 31, 1995. This decline is primarily
the result of seasonal increases in public fund accounts at December 31, 1995
that subsequently declined.
There have been no other material changes in the financial condition of Horizon
from December 31, 1995 to March 31, 1996.
<PAGE>
RESULTS OF OPERATIONS
MATERIAL CHANGES IN RESULTS OF OPERATIONS - MARCH 31, 1996 COMPARED TO
MARCH 31, 1995.
First quarter 1996 earnings totaled $869 thousand or $1.16 per share compared to
$1.498 million or $1.97 per share for the same quarter in 1995. In March 1995,
Horizon received a federal income tax refund totaling $1.190 million including
interest of $298 thousand or $1.57 per share. Without the effect of the tax
refund and related interest income, earnings per share increased $.73 or 170%.
Net interest income was $4.070 million for the first quarter 1996 compared to
$3.714 million for the same period 1995. This increase is primarily the result
of strong loan growth, especially in the direct installment and mortgage loan
portfolios.
Total noninterest income for the first quarter of 1996, excluding the effects of
interest on Federal income tax refunds of $298, increased $179 thousand or 22%
from the same quarter in 1995. The largest component of the change was in the
Trust Department income which increased $93 thousand or 22% from the same period
in 1995.
Noninterest expense increased slightly from $3.704 million to $3.784 million for
the first quarter 1996 compared to 1995. The largest increase was in data
processing expense of $85 thousand. Salaries and benefits were essentially
unchanged with a $17 thousand increase to $1.967 million. Horizon continues to
monitor its staffing model to determine the optimum number of owner-employees
per operating division.
There have been no other material changes in the results of operations of
Horizon from December 31, 1995 to March 31, 1996.
<PAGE>
PART II - OTHER INFORMATION
For the quarter ended March 31, 1995
ITEM 1. LEGAL PROCEEDINGS
See Management's Discussion and Analysis
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. January 17, 1995 - Significant matters to shareholders
b. March 23, 1995 - Horizon receives $1.190 million income tax refund
<PAGE>
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 BANCORP
BY: Larry E. Reed
Chairman and Chief Executive Officer
Date: May 14, 1996
BY: Diana E. Taylor
Vice President and Chief Financial Officer
Date: May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Mar-31-1996
<CASH> 16,480
<INT-BEARING-DEPOSITS> 206
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 67,108
<INVESTMENTS-CARRYING> 11,459
<INVESTMENTS-MARKET> 11,470
<LOANS> 246,588
<ALLOWANCE> 2,761
<TOTAL-ASSETS> 359,142
<DEPOSITS> 284,092
<SHORT-TERM> 13,529
<LIABILITIES-OTHER> 3,533
<LONG-TERM> 25,400
0
0
<COMMON> 732
<OTHER-SE> 31,856
<TOTAL-LIABILITIES-AND-EQUITY> 359,142
<INTEREST-LOAN> 5,476
<INTEREST-INVEST> 1,360
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 6,836
<INTEREST-DEPOSIT> 2,278
<INTEREST-EXPENSE> 488
<INTEREST-INCOME-NET> 4,070
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,784
<INCOME-PRETAX> 1,274
<INCOME-PRE-EXTRAORDINARY> 1,274
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 869
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
<YIELD-ACTUAL> 5.01
<LOANS-NON> 580
<LOANS-PAST> 460
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 42
<ALLOWANCE-OPEN> 2,777
<CHARGE-OFFS> 78
<RECOVERIES> 62
<ALLOWANCE-CLOSE> 2,761
<ALLOWANCE-DOMESTIC> 2,761
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,848
</TABLE>
