<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended SEPTEMBER 30, 1995 Commission File Number: 0-11672
------------------ -------
HORIZON BANCORP, INC.
---------------------
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 55-0631939
- ------------------------------- -------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
BOX D, BECKLEY, WV 25802-2803
- ------------------------------- -------------------------------
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code (304) 255-7000
---------------------
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 periods 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.
Class Outstanding at October 20, 1995
- ----------------------------- ----------------------------
COMMON STOCK, $1.00 PAR VALUE 2,831,130 SHARES
<PAGE> 2
HORIZON BANCORP, INC.
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-September 30, 1995 and
December 31, 1994
Condensed Consolidated Statements of Income for The Three Months Ended
September 30, 1995 and 1994 and For the Nine Months Ended
September 30, 1995 and 1994
Condensed Consolidated Statement of Changes in Shareholders' Equity for
The Nine Months Ended September 30, 1995
Condensed Consolidated Statements of Cash Flows for The Nine Months Ended
September 30, 1995 and 1994
Notes to Condensed Consolidated Financial Statements-September 30, 1995
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
EXHIBIT 11
Computation of Earnings Per Share
EXHIBIT 27
Financial Data Schedule
2
<PAGE> 3
CONDENSED CONSOLIDATED BALANCE SHEETS
HORIZON BANCORP, INC. & SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) SEPTEMBER 30, DECEMBER 31,
1995 1994
<S> <C> <C>
ASSETS
- ------
Cash and Due From Banks $ 18,213 $ 19,082
Federal Funds Sold 4,025 5,350
-------- --------
Total Cash and Cash Equivalents 22,238 24,432
Investment Securities:
Available-For-Sale (At Fair Value) 69,576 57,569
Held-To-Maturity (Approximate Fair Value of $81,803
at September 30, 1995 and $93,445 at December 31, 1994) 81,079 97,581
Loans:
Commercial 103,741 100,169
Real Estate 201,834 188,323
Loans to Individuals 115,009 93,119
-------- --------
Total Loans 420,584 381,611
Less: Unearned Income (6,310) (4,701)
Allowance for Loan Losses (6,594) (6,328)
-------- --------
Net Loans 407,680 370,582
-------- --------
Premises and Equipment-Net 10,176 7,097
Other Assets 11,918 12,674
-------- --------
Total Assets $602,667 $569,935
======== ========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 70,572 $ 70,781
Interest Bearing 437,796 412,774
-------- --------
Total Deposits 508,368 483,555
Short-Term Borrowings 18,527 16,797
Other Liabilities 6,257 6,001
-------- --------
Total Liabilities 533,152 506,353
-------- --------
SHAREHOLDERS' EQUITY
- --------------------
Common Stock (Par Value $1.00 Per Share,
Authorized 5,000,000 Shares, 2,835,670 Issued
and Outstanding, Including 4,540 Shares in
Treasury at September 30, 1995) 2,835 2,835
Capital Surplus 12,262 12,262
Retained Earnings 54,051 49,903
Treasury Stock; at Cost (140) 0
Unrealized Gain (Loss) on Available-for-Sale
Securities, Net of Deferred Income Taxes 507 (1,297)
Deferred ESOP Benefit 0 (121)
-------- --------
Total Shareholders' Equity 69,515 63,582
-------- --------
Total Liabilities and Shareholders' Equity $602,667 $569,935
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
HORIZON BANCORP, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(DOLLARS IN THOUSANDS, SEPTEMBER 30 SEPTEMBER 30
EXCEPT PER SHARE DATA) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
- ---------------
Interest and Fees on Loans $ 9,851 $ 7,922 $26,913 $22,365
Investment Securities:
Taxable 1,751 1,741 5,215 5,610
Exempt from Federal Taxes 521 521 1,548 1,573
Federal Funds Sold and Other 150 141 490 449
------- ------- ------- -------
Total Interest Income 12,273 10,325 34,166 29,997
INTEREST EXPENSE
- ----------------
Interest on Deposits 4,766 3,468 12,807 10,468
Interest on Borrowings 142 145 376 404
------- ------- ------- -------
Total Interest Expense 4,908 3,613 13,183 10,872
------- ------- ------- -------
Net Interest Income 7,365 6,712 20,983 19,125
Provision for Loan Losses 300 310 785 939
------- ------- ------- -------
Net Interest Income After Provision for
Loan Losses 7,065 6,402 20,198 18,186
OTHER INCOME
- ------------
Service Charges and Fees 501 421 1,297 1,245
Investment Securities (Losses) Gains 0 (15) (131) 3
Other 195 244 1,031 673
------- ------- ------- -------
Total Other Income 696 650 2,197 1,921
OTHER OPERATING EXPENSES
- ------------------------
Salaries and Employee Benefits 2,151 1,971 6,390 5,977
Net Occupancy 628 478 1,740 1,453
Other Expenses 1,784 1,803 4,986 5,103
------- ------- ------- -------
Total Other Operating Expenses 4,563 4,252 13,116 12,533
------- ------- ------- -------
Income Before Income Taxes 3,198 2,800 9,279 7,574
Applicable income taxes 1,076 779 3,010 2,225
------- ------- ------- -------
$ 2,122 $ 2,021 $ 6,269 $ 5,349
======= ======= ======= =======
Net Income Per Common Share $ 0.75 $ 0.71 $ 2.21 $ 1.89
======= ======= ======= =======
Dividends Per Share $ 0.25 $ 0.24 $ 0.75 $ 0.72
======= ======= ======= =======
Average Common Shares Outstanding 2,832 2,835 2,834 2,835
(In Thousands) ======= ======= ======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE> 5
CONDENSED
CONSOLIDATED STATEMENT
OF SHAREHOLDERS' EQUITY
HORIZON BANCORP, INC. AND SUBSIDIARIES
(Unaudited)
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
DEFERRED AVAILABLE-
COMMON CAPITAL RETAINED ESOP FOR-SALE TREASURY CONSOLIDATED
STOCK SURPLUS EARNINGS BENEFIT SECURITIES SHARES TOTALS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994 $ 2,835 $12,262 $49,903 $ (121) $(1,297) $ - $63,582
Net Income Nine
Months Ended
September 30, 1995 6,269 6,269
Cash Dividends ($0.75
Per Share) (2,121) (2,121)
Change in Unrealized
Loss on Available-for-Sale
Securities, Net of Deferred
Income Taxes 1,804 1,804
Reduction in ESOP
Indebtedness 121 121
Purchase of Treasury Shares (140) (140)
------- ------- ------- ------- ------- ----- -------
BALANCE, SEPTEMBER 30, 1995 $ 2,835 $12,262 $54,051 $ 0 $ 507 $ (140) $69,515
======= ======= ======= ======= ======= ===== =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE> 6
HORIZON BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) NINE MONTHS ENDED
SEPTEMBER 30
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net Income $ 6,269 $ 5,349
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 780 515
Amortization 173 194
Provision for Loan Losses 785 939
Loss (Gain) on Sale of Investments 131 (3)
(Gain) on Sale of Other Real Estate (151) 0
Change in Other Assets (266) (869)
Change in Other Liabilities (820) (134)
-------- --------
Net Cash Provided by Operating Activities 6,901 5,991
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Proceeds from Maturities of Interest-Bearing Deposits 0 1,998
Proceeds from Maturities of Available-for-Sale Investments 4,415 5,523
Proceeds from Sales of Available-for-Sale Investments 5,612 6,043
Proceeds from Maturities of Held-to-Maturity Investments 20,763 32,355
Purchases of Available-for-Sale Investments (22,098) (16,284)
Purchases of Held-to-Maturity Investments (1,334) (12,207)
Net Change in Loans (19,345) (25,877)
Purchases of Premises and Equipment (3,860) (212)
Cash Paid to Purchase Bank Branches, Net of
Cash Acquired and Liabilities Assumed 3,456 0
-------- --------
Net Cash Used in Investing Activities (12,391) (8,661)
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Net Change in Deposits 3,826 2,461
Net Change in Short-Term Borrowings 1,730 7,719
Payments on Long-Term Borrowings 0 (800)
Cash Dividends Paid (2,121) (2,041)
Purchase of Treasury Shares (140) 0
-------- --------
Net Cash Provided by Financing Activities (3,296) (7,339)
-------- --------
Net (Decrease) Increase in Cash and Cash Equivalents (2,194) 4,669
Cash and Cash Equivalents:
Beginning of Period 24,432 21,672
-------- --------
End of Period $ 22,238 $ 26,341
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
HORIZON BANCORP, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1995
(Unaudited)
(DOLLARS IN THOUSANDS)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements
have been prepared by Horizon Bancorp, Inc. ("Horizon"), in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
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
accruals, considered necessary for a fair presentation have been included. The
results of operations for the nine month period ended September 30, 1995, are
not necessarily indicative of the results to be expected for the year ending
December 31, 1995.
These financial statements are to be read in conjunction with the financial
statements and notes included in the 1994 Annual Report and Form 10-K of
Horizon Bancorp, Inc.
NOTE 2. ACQUISITIONS
Horizon, through two of its subsidiary banks, entered into purchase and
assumption agreements with Huntington National Bank ("Huntington") under which
Horizon's subsidiary banks purchased certain assets and assumed certain
liabilities of Huntington.
Greenbrier Valley National Bank acquired the Huntington office at
Fairlea, Greenbrier County, with assets of approximately $4,627 on March 31,
1995. Bank of Raleigh acquired Huntington offices located at Beaver and
Sophia, Raleigh County, and at Oak Hill in Fayette County on May 12, 1995. The
assets of these offices acquired by Bank of Raleigh totaled approximately
$13,649.
7
<PAGE> 8
NOTE 3. SUMMARY OF LOAN LOSS EXPERIENCE
A summary of the changes in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1995 1994
---- ----
<S> <C> <C>
Balance at Beginning of Period $6,328 $5,651
Charge-offs
Commercial 62 230
Real Estate 75 80
Loans to Individuals 686 591
------ ------
823 901
Recoveries
Commercial 72 120
Real Estate 3 5
Loans to Individuals 229 220
------ ------
304 345
Net Charge-offs 519 556
Provision for Loan Losses 785 939
------ ------
Balance at End of Period $6,594 $6,034
====== ======
Percentage of Annualized Net Charge-offs
During the Periods to Average Net Loans
Outstanding During the Period 0.18% 0.21%
Percentage of Allowance for Loan Losses
to Period-End Loans, Net of Unearned Income 1.59% 1.59%
Percentage of Nonaccrual Loans
to Period-End Loans, Net of Unearned Income 0.64% 1.90%
</TABLE>
8
<PAGE> 9
NOTE 4: INVESTMENT SECURITIES
The following is a summary of available-for-sale securities and
held-to-maturity securities:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-----------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1995
U.S. Treasury Securities and
Obligations of U.S. Government
Agencies and Corporations $ 51,869 $1,073 $ (188) $ 52,754
Mortgage-backed Securities 9,873 108 (125) 9,856
Other Debt Securities 1,964 44 0 2,008
---------------------------------------------------
Total Debt Securities $ 63,706 $1,225 $ (313) $ 64,618
Equity Securities 5,004 0 (46) 4,958
---------------------------------------------------
Totals $ 68,710 $1,225 $ (359) $ 69,576
===================================================
</TABLE>
<TABLE>
<CAPTION>
HELD-TO-MATURITY SECURITIES
---------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1995
U.S. Treasury Securities and
Obligations of U.S. Government
Agencies and Corporations $ 37,929 $ 268 $ (208) $ 37,989
Obligations of States and
Political Subdivisions 41,614 756 (152) 42,218
Mortgage-backed Securities 54 3 0 57
Other Debt Securities 1,482 57 0 1,539
-----------------------------------------------------
Totals $ 81,079 $1,084 $ (360) $ 81,803
=====================================================
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-----------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
U.S. Treasury Securities
and Obligations of U.S.
Government Agencies
and Corporations $ 44,787 $ 4 $(1,411) $ 43,380
Mortgage-backed Securities 10,579 15 (584) 10,010
Equity Securities 4,365 -- (186) 4,179
---------------------------------------------------
Totals $ 59,731 $ 19 $(2,181) $ 57,569
===================================================
</TABLE>
<TABLE>
<CAPTION>
HELD-TO-MATURITY SECURITIES
---------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
DECEMBER 31, 1994
U.S. Treasury Securities
and Obligations of U.S.
Government Agencies
and Corporations $ 55,290 $ 45 $(1,429) $ 53,906
Obligations of States and
Political Subdivisions 40,749 79 (2,786) 38,042
Mortgage-backed Securities 62 2 -- 64
Other Debt Securities 1,480 -- (47) 1,433
---------------------------------------------------
Totals $ 97,581 $126 $(4,262) $ 93,445
===================================================
</TABLE>
Management determines the appropriate classification of securities at
the time of purchase. If management has the intent and the Company has the
ability at the time of purchase to hold securities until maturity, they are
classified as held-to-maturity investments and carried at amortized historical
cost adjusted for amortization of premiums and accretion of discounts, which
are recognized as adjustments to interest income.
In October 1995, the Financial Accounting Standards Board (FASB)
approved a one-time "holiday" from FASB No. 115 restrictions over
held-to-maturity securities. Companies will have a one time opportunity to
restructure their portfolios from November 1 to December 31, 1995.
Specifically, the FASB decided that companies may sell or transfer securities
from their held-to-maturity portfolio without calling into question their
intent to hold other debt securities to maturity in the future or their past
financial reporting. Horizon has not yet completed their analysis of the
potential impact of the FASB No. 115 "holiday"; however, the company intends
to take advantage of the "holiday" if it will favorably impact their
asset/liability strategy.
10
<PAGE> 11
Securities to be held for indefinite periods, including securities that
management intends to use as part of its asset/liability strategy, or that
may be sold in response to changes in interest rates, changes in prepayment
risk, changes in regulatory capital requirements, or other similar factors,
are classified as available-for-sale and are carried at fair value.
NOTE 5. NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued SFAS No. 114, "Accounting
by Creditors for Impairment of a Loan." SFAS No. 114 requires that impaired
loans be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical expedient,
at the loan's observable market price or fair value of the collateral if the
loan is collateral dependent.
Horizon adopted SFAS No. 114 as of January 1, 1995 and impaired loans
approximated $2,545. Included in this amount is approximately $2,545 of
impaired loans for which the related allowance for loan losses is $679. At
September 30, 1995, impaired loans approximated $2,917, of which $1,642 were on
a nonaccrual basis and for which the related allowance for loan losses is $528.
The average recorded investment in impaired loans during the nine month period
ended September 30, 1995 approximated $2,585.
Horizon recognizes interest income on impaired loans using the cash basis
method. For the nine month period ended September 30, 1995, Horizon recognized
interest income on impaired loans of $88. The adoption of this new accounting
standard has not had and is not expected to have a material impact on Horizon's
financial statements, its accounting policies or the determination of the
adequacy of the allowance for loan losses.
During 1995, the FASB issued Statement No. 122, an Amendment to Statement No.
65, Accounting for Mortgage Servicing Rights. Horizon is not currently engaged
in significant mortgage banking activities and does not originate or acquire
loans for resale. Accordingly, Statement No. 122 will not have a significant
impact on Horizon's financial statements.
In October 1995, the FASB issued Statement No. 123, Accounting for Stock-Based
Compensation. Statement No. 123 defines a fair value based method of accounting
for an employee stock option or similar equity instrument or allows an entity
to continue to measure compensation cost for those plans using the intrinsic
value based method of accounting prescribed by APB Opinion No. 25, Accounting
for Stock Issued to Employees. Statement No. 123 is effective for transactions
entered into in fiscal years that begin after December 15, 1995.
Under the fair value based method, compensation cost is measured at the grant
date based on the value of the award and is recognized over the service period,
which is usually the vesting period. Under the intrinsic value based method,
compensation cost is the excess if any, of the quoted market price of the
stock at grant date or other measurement date over the amount an employee must
pay to acquire the stock. Horizon maintains a fixed stock option plan and such
options have no intrinsic value at the grant date, and under Opinion 25 no
compensation cost is recognized for them.
As allowed by Statement No. 123, Horizon has elected to continue accounting for
stock-based compensation under Opinion 25, and accordingly, will make pro forma
disclosures of net income and earnings per share as if the fair value based
method of accounting defined in Statement No. 123 had been applied.
11
<PAGE> 12
HORIZON BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following is a discussion and analysis focused on significant changes in
the financial condition and a review of the results of operations of Horizon
Bancorp, Inc. Horizon is a multi-bank holding company whose subsidiaries are
Bank of Raleigh, First National Bank in Marlinton, Greenbrier Valley National
Bank, and National Bank of Summers of Hinton. The financial information in
this section should be read in conjunction with the December 31, 1994
consolidated financial statements and the accompanying notes to the
financial statements.
RESULTS OF OPERATIONS
For the nine months ended September 30, 1995, Horizon's net income totaled
$6,269, as compared to $5,349 for the same period of 1994. This represents
an increase of $920 or 17.20% in net income for the first nine months of 1995
as compared to the same period of 1994. Earnings per average common share
for the nine months ended September 30, 1995 and 1994 were $2.21 and $1.89,
respectively.
Contributing factors to the increase in Horizon's net income for the nine months
ended September 30, 1995, included an increase of $1,858 in net interest
income, a decrease in provision for loan losses of $154, and an increase in
other income of $276. These factors were partially offset by an increase of
$583 in total other operating expenses, and an increase of $785 in applicable
income taxes.
Return on average assets (ROA) measures the effectiveness of the utilization of
assets in generating earnings while return on average equity (ROE) measures
income earned relative to the amount of shareholders' investment. For
the nine months ended September 30, 1995, Horizon's ROA approximated 1.42% and
compared to 1.27% for the nine months ended September 30, 1994. For the nine
months ended September 30, 1995, Horizon's ROE was 12.47%, an increase from
the September 30, 1994, total of 11.53%.
Net income for the three months ended September 30, 1995, was $2,122 as
compared to $2,021 for the same period of 1994. This represents an increase
of $101 or 5.00% in net income for the comparable third quarter periods.
Factors contributing to the increase in net income for the three-month period
ended September 30, 1995, included an increase of $653 in net interest income, a
decrease of $10 in provision for loan losses, and an increase of $46 in other
income. These factors were partially offset by an increase of $311 in total
other operating expenses, and an increase of $297 in applicable income taxes.
12
<PAGE> 13
NET INTEREST INCOME
Horizon's net interest income represents the excess of interest earned on
loans, investment securities and other interest-earning assets over the
interest incurred on deposits and borrowings and is the largest source of
earnings. Net interest income is influenced by the volume of and relative yield
(or cost) of earning assets and interest-bearing liabilities and the relative
sensitivity of such assets and liabilities to changes in interest
rates. Within this discussion, net interest income is presented on a
taxable-equivalent basis to adjust for the tax favored status of earnings from
certain loans and investments, principally obligations of state and local
governments.
During the first nine months of 1995, Horizon's net interest income (FTE)
increased $1,956 or 9.80% from September 30, 1994. Horizon's net yield on
interest-earning assets for the period ended September 30, 1995, increased
to 5.3% from 5.0% for the same period of 1994. This increase can be
attributed to the weighted average yield on interest-earning assets
increasing at a more rapid pace than the weighted average cost of
interest-bearing liabilities.
Horizon's average interest-earning assets increased $21,796 or 4.09% from the
September 30, 1994, total of $533,366. This increase resulted primarily from a
growth in loans of $35,228 or 9.81%. Included in this average is approximately
$14,381 in loans purchased from Huntington National Bank. The remaining
increase in loans resulted from higher demand for commercial, real estate, and
consumer loans, and reflected marketing efforts and local economic factors. A
decrease in total securities and an increase in deposits has funded most of the
growth in loans. Investment securities decreased $12,065 or 7.46% from an
average balance of $161,736 at September 30, 1994 to an average balance of
$149,671 during the nine months ended September 30, 1995.
Average interest-bearing liabilities increased $12,119 or 2.81% from $431,344
during the nine months ended September 30, 1994 to $443,463 for the nine months
ended September 30, 1995. Increases, primarily in time savings, were somewhat
offset by decreased interest-bearing demand deposits and regular savings
deposits over the reported period. The weighted average cost of funds increased
from 3.4% for the nine months ended September 30, 1994, to 4.0% for the nine
months ended September 30, 1995. The weighted average cost of funds increased
in the time savings category 110 basis points, while regular short-term
borrowings declined 20 basis points in cost and interest-bearing demand
deposits and savings deposits declined 10 basis points.
The following chart illustrates the average distribution of assets, liabilities
and shareholders' equity, interest earnings and expense, and average rates, for
the nine months ended September 30, 1995 and 1994.
13
<PAGE> 14
AVERAGE RATES
AVERAGE DISTRIBUTION OF ASSETS, LIABILITIES AND
SHAREHOLDERS' EQUITY, INTEREST EARNINGS & EXPENSES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------------------ ------------------------------
AVERAGE EARNINGS/ YIELD/ AVERAGE EARNINGS/ YIELD/
BALANCES EXPENSE RATE BALANCES EXPENSE RATE
------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans, net of unearned
interest (1) $394,158 $27,098 9.2% $358,930 $22,435 8.3%
Securities
Taxable 108,350 5,215 6.4% 120,731 5,610 6.2%
Tax-exempt (2) 41,321 2,345 7.6% 41,005 2,383 7.7%
-------- ------- ---- -------- ------- ----
Total Securities 149,671 7,560 6.7% 161,736 7,993 6.6%
-------- ------- ---- -------- ------- ----
Interest-bearing deposits
with other banks 0 0 0.0% 1,329 109 10.9%
Federal funds sold & other 11,333 490 5.8% 11,371 340 4.0%
-------- ------- ---- -------- ------- ----
Total interest-earning
assets 555,162 35,148 8.4% 533,366 30,877 7.7%
-------- ------- ---- -------- ------- ----
Noninterest-earning assets:
Cash and due from banks 15,220 15,142
Premises and equipment-net 8,396 6,994
Other assets 14,594 10,800
Allowance for loan losses (6,422) (5,839)
-------- --------
Total assets $586,950 $560,463
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest-bearing liabilities:
Interest-bearing demand
deposits $ 84,801 $ 1,727 2.7% $ 90,246 $ 1,869 2.8%
Regular savings 117,663 2,835 3.2% 132,565 3,236 3.3%
Time savings 222,273 8,225 4.9% 190,636 5,364 3.8%
Other borrowings 18,726 396 2.8% 17,897 403 3.0%
-------- -------- ---- -------- ------- ----
Total interest-bearing
liabilities 443,463 13,183 4.0% 431,344 10,872 3.4%
-------- -------- ---- -------- ------- ----
Noninterest-bearing liabilities:
Demand deposits 69,136 61,781
Other liabilities 7,320 5,505
-------- --------
Total liabilities 519,919 498,630
-------- --------
Shareholders' equity 67,030 61,833
-------- --------
Total liabilities and
shareholders' equity $586,950 $560,463
======== ========
NET INTEREST EARNINGS $21,961 $20,005
======= =======
NET YIELD ON INTEREST-EARNING ASSETS 5.3% 5.0%
=== ====
<FN>
(1) Nonaccrual loans are included in average balances.
(2) Fully taxable-equivalent using a rate of 34%.
</TABLE>
14
<PAGE> 15
ALLOWANCE FOR LOAN LOSSES
Horizon's policy to maintain the allowance for loan losses at an adequate level
to absorb estimated losses inherent in the portfolio. The allowance is composed
of amounts specifically provided for loans reviewed on an individual or pool
basis and an additional amount based on several factors including historical
losses, economic conditions and industry trends. The allowance for loan losses
was $6,594 at September 30, 1995, compared to $6,328 at December 31, 1994.
Expressed as a percentage of total loans, net of unearned income, the
allowance for loan losses was 1.59% at September 30, 1995, and 1.68% at
December 31, 1994. This slightly lower level is due to improved asset quality
measures including trends in net charge-offs, delinquencies and nonaccrual
loans. While asset quality has improved, an additional amount was added to
the allowance to provide for $14,381 of loans acquired from Huntington
National Bank during 1995.
For the nine-month period ended September 30, 1995, charge-offs have decreased
$78 or 8.66% from the applicable period in 1994. Charge-offs of commercial
loans decreased $168 or 73.04%. The decline in charge-offs is an indication of
improvement in the local economy. Real estate loan charge-offs declined $5 or
6.25% from the comparable period in 1994. Charge-offs on loans to individuals
increased $95 or 16.07% for the nine months ended September 30, 1995, from the
comparable period in 1994. This increase in charge-offs of consumer loans was
the result of more aggressive charge-off procedures, the increase in the
volume of consumer loans and a higher level of credit card outstandings.
Horizon's provision for loan losses totaled $785 for the nine months ended
September 30, 1995, representing a 16.40% decrease from the provision charged to
income for the nine months ended September 30, 1994. The decreased provision
for loan losses was deemed prudent in light of the improvement in asset
quality as evidenced by a decline of $349 or 11.71% in nonaccrual
loans from December 31, 1994 to September 30, 1995. However the third-quarter
provision was increased slightly over the provision in the first two quarters
of 1995 to allow for the risk associated with the loans purchased from
Huntington National Bank, and because of the increased level of credit card
lending.
Horizon's loans, 90 days or more delinquent and still accruing interest at
September 30, 1995, decreased from $1,781 at December 31, 1994, to $1,720 at
September 30, 1995, or 3.43%. Expressed as a percentage of total loans,
Horizon's loans 90 or more days delinquent totaled 0.42% at September 30, 1995,
as compared to 0.47% at December 31, 1994.
Horizon's policy is to place in nonaccrual status those loans (including loans
impaired under SFAS No. 114) which are past due over 90 days, unless the loans
are adequately secured and in the process of collection. Nonaccrual loans
totaled $2,632 at September 30, 1995, and have decreased $349 or 11.71% from
December 31, 1994. A major portion of the decrease was noted in nonaccrual
real estate loans which decreased $389 or 22.27% from $1,747 at December 31,
1994 to $1,358 at September 30, 1995 and was the result of the liquidation of
real estate securing a large commercial loan at a subsidiary bank.
15
<PAGE> 16
Nonperforming assets as of September 30, 1995,
and December 31, 1994 were:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
<S> <C> <C>
Nonaccruing Loans $ 2,632 $ 2,981
Loans Past Due 90 Days or
More and Still Accruing Interest 1,720 1,781
------- ------
Total $ 4,352 $ 4,762
======= =======
Total Nonaccrual Loans as a
% of Total Loans, Net of Unearned 0.64% 0.79%
Loans Past Due 90 Days or More and
Still Accruing Interest as a
% of Total Loans, Net of Unearned 0.42% 0.47%
</TABLE>
Based upon management's current assessment of the loan portfolio, there are no
additional significant loans which have been identified as potential problem
loans or that would cause the allowance for loan losses to be materially
misstated.
Horizon's foreclosed real estate totaled $491 at September 30, 1995, and has
decreased $271 or 35.56% from $762 at December 31, 1994. Management
is actively seeking disposition of all tracts with a minimal amount of loss
anticipated.
NONINTEREST INCOME
For the nine months ended September 30, 1995, noninterest income totaled
$2,197 and has increased $276 or 14.37% from the $1,921 reported in the same
period in 1994. Noninterest income represents all sources of income except
that derived from interest on earning assets.
Service charges on deposit accounts and other fee income totaled $1,297 for the
first nine months of 1995 and have increased $52 or 4.18% from the 1994
period. This increase is primarily due to $54 in service charges and other fee
income on deposit accounts acquired from Huntington Natioanl Bank. It is also
noted that average deposit balances increased $18,645 or 3.92% from $475,228
at September 30, 1994 to $493,873 at September 30, 1995.
For the nine-month period ended September 30, 1995, other noninterest income
increased $358 or 53.19% and was primarliy due to an increase of $90 or 33.21%
in trust income, a result of increased estate settlements and to a gain of
$151 on sale of other real estate.
Investment securities losses were $131 during the first nine months of 1995 as
compared to securities gains of $3 during the first nine months of 1994. These
losses were incurred to take advantage of the availability of higher yielding
investments.
For the three month period ended September 30, 1995, Noninterest income
increased $46 or 7.08% and is primarily due to an increase of $80 or 19.00%
in service charges and fees. This increase is due to $48 in service charges on
deposit accounts acquired from Humtington National Bank and increased service
charge fees at the subsidiary banks.
16
<PAGE> 17
NONINTEREST EXPENSE
Horizon's noninterest expense for the nine months ended September 30,
1995, totaled $13,116, an increase of $583 or 4.65% over the total for
the nine months ended September 30, 1994, of $12,533. Primary contributors
to the increase included a $413 or 6.91% increase in salaries and employee
benefits and a $287 or 19.75% increase in net occupancy expenses.
Salaries and employee benefits are historically the largest component of
noninterest expense. The $413 increase in this category is the result of
additional personnel due to the Huntington National Bank branch locations
purchase and regular salary increases. The increase in net occupancy expense is
primarily due to $304 additional depreciation on computer equipment purchased
during the first nine months of 1995.
For the three-month period ended September 30, 1995, noninterest expenses were
$4,563, an increase of $311 or 7.31% from the levels incurred for the same
period of 1994. The increase is due to a $180 rise in salaries and employee
benefits which reflects additional personnel, a $150 increase in net occupancy
expenses related to Horizon's data processing conversion, a $14 increase in
telephone expense, and small increases in other categories. These
increases were partially offset with a $117 decrease in FDIC deposit insurance
premiums during the third quarter of 1995.
INCOME TAXES
The effective tax rate was 32.44% for the nine months ended September 30, 1995,
and compares to 29.38% for the nine-month period ended September 30, 1994.
During the nine month period ended September 30, 1995, the effective tax rate
has risen 10.42% and follows an increase of $1,705 or 22.51% in income before
income taxes. For the three-month period ended September 30, 1994, the
effective tax rate was 33.65% and compares to 27.82% for the three-month
period ended September 30, 1994. The increase in the effective tax rate of
20.96% follows an increase of $398 or 14.21% in income before income taxes.
The higher effective tax rate for the third quarter and the first three
quarters of 1995 compared to the same periods in 1994 reflects a lower ratio of
tax exempt to taxable income in 1995.
BALANCE SHEET ANALYSIS
Total assets increased $32,732 or 5.74% from the December 31, 1994, total. At
September 30, 1995, total assets were $602,667 and are compared to the
December 31, 1994, total of $569,935.
Federal funds sold decreased $1,325 or 24.77% from the December 31, 1994,
total of $5,350. The decrease is due to loan commitments funded in the third
quarter of 1995. Horizon is experiencing stronger loan demand because of
Local economic factors, a more active officer call program, and a marketing
program which continues to emphasize the locally-owned status of the
corporation.
Investment securities totaled $150,655 at September 30, 1995, and have decreased
$4,495 or 2.90% from the December 31, 1994, total of $155,150. This is
attributable to loan demand and reflects management's strategy to fund
portions of loan growth through maturities of investment securities.
17
<PAGE> 18
Growth in total loans has evidenced stronger loan demand in the first three
quarters of 1995 of $24,592, plus $14,381 in loans purchased from Huntington
National Bank. Growth occurred in consumer loans which increased $21,890 or
23.51% from year-end 1994 due primarily to the acquisition of assets from
Huntington National Bank. Real estate loans increased $13,511 or 7.17% from
December 31, 1994, and evidences increasing construction and residential
purchases in the market area of the subsidiary banks. Commercial loans have
increased $3,572 or 3.57% from December 31, 1994.
Net premises and equipment have increased $3,079 or 43.38% from $7,097 at
December 31, 1994 to $10,176 at September 30, 1995. Significant items in the
increase include $1,871 for construction of a subsidiary bank building, $200 for
purchase of real estate, and $1,185 for purchase of computer equipment reduced
by increase in depreciation to upgrade Horizon's information systems.
Total deposits at September 30, 1995 were $508,368 and have increased $24,813
or 5.13% from the December 31, 1994, total of $483,555. The loan-to-deposit
ratio was 81.27% at September 30, 1995, and compares to 77.95% at December 31,
1994. This increase is due to Horizon's strategic effort to improve earnings
and increase shareholder value.
At September 30, 1995, short-term borrowings consist of securities sold
under agreements to repurchase which are offered for customer accommodation and
borrowings of $1,000 from the Federal Home Loan Bank of Pittsburgh. Total
repurchase agreements of $17,527 represent an increase of $730 or 4.35% from
$16,797 at December 31, 1994. The FHLB borrowings is a one-year term note
indexed to the prime rate and was used to fund a portion of a commerical loan.
Shareholders' equity increased $5,933 or 9.33% from the total at December 31,
1994, and is primarily attributable to retention of earnings and the change
in unrealized loss on available-for-sale securities of $1,297 to an unrealized
gain on available-for-sale securities of $507.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Horizon's liquidity position is believed to be adequate for the availability of
funds for loan growth and deposit withdrawals, and provides for other
transaction requirements. Liquidity is provided primarily by investments in
cash and cash equivalents and maturities of investments and loans. The
liquidity position is monitored regularly and management is not aware of any
trends, commitments, or events that are likely to result in a liquidity
increase or decrease in a material amount.
Interest rate risk is measured through a static gap analysis which is shown in
the following table. Within the three months or less time frame are balances
of interest-bearing transaction accounts and regular savings totaling
$196,484. This is the primary reason that Horizon is in a negative gap
position for that period. The subsidiary banks are currently experiencing an
increase in certificates of deposit as consumers are responding to an upward
trend in market interest rates.
18
<PAGE> 19
The following table represents the interest sensitivity gap for periods
presented taking into consideration the periodic payments on loans and
contractual repricing of interest-bearing assets or interest-bearing
liabilities.
<TABLE>
<CAPTION>
ASSETS & LIABILITIES AFTER AFTER
MATURITIES & RATE 3 MONTHS 1 YEAR
SENSITIVITY 3 MONTHS WITHIN WITHIN OVER
SEPTEMBER 30, 1995 OR LESS 12 MONTHS 5 YEARS 5 YEARS TOTAL
-------- ---------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
EARNING ASSETS
Loans* $ 89,920 $ 93,820 $157,554 $ 76,658 $417,952
Investments 14,433 15,576 65,537 55,110 150,656
Federal Funds Sold 4,025 0 0 0 4,025
----------------------------------------------------------------
Total Interest-
Earning Assets 108,378 109,396 223,091 131,768 572,633
INTEREST-BEARING
LIABILITIES
Interest-Bearing
Transaction Accounts 82,624 0 0 0 82,624
Savings 113,860 0 0 0 113,860
Time Savings 59,814 117,032 64,466 0 241,312
Short-term Borrowing 18,527 0 0 0 18,527
----------------------------------------------------------------
Total Interest-
Bearing Liabilities 274,825 117,032 64,466 0 456,323
----------------------------------------------------------------
Interest Sensitivity
Gap $(166,447) $ (7,636) $158,625 $131,768 $ 116,310
================================================================
Cumulative Interest
Sensitivity Gap $(166,447) $(174,083) $(15,458) $116,310
===================================================
Ratio of Interest-
Sensitive Assets to
Interest-Sensitive
Liabilities 39.44% 93.48%
=====================
Ratio of One Year Cumulative
Interest Sensitivity Gap to Total
Assets (28.89%)
<FN>
*Nonaccrual loans are not included.
Noninterest-bearing demand deposits are not considered in this analysis.
</TABLE>
19
<PAGE> 20
CAPITAL RESOURCES AND DIVIDENDS
Beginning January 1, 1994, FAS 115 required available-for-sale investments to
be carried at fair value with a corresponding adjustment, net of tax, included
in shareholders' equity. At September 30, 1995, shareholders' equity included
an unrealized net gain on available-for-sale investments of $507. Because bond
rates experienced a general decline in the first quarter of 1995, the unrealized
net gain or loss on available-for-sale securities changed from an unrealized
net loss of ($1,297) at December 31, 1994 to an unrealized net gain of
$507 at September 30, 1995.
Shareholders' equity when expressed as a percentage of total assets totaled
11.53% on September 30, 1995, an increase of 3.32% from the 11.16% reported on
December 31, 1994. The primary capital ratio, which includes equity and the
allowance for loan losses, was 12.49% on September 30, 1995, and has increased
2.97% from the 12.13% reported on December 31, 1994. The Federal regulatory
agencies have adopted risk-based capital guidelines; Horizon continues to be
well above the minimum guidelines for all risk-based ratios.
Pertinent capital ratios were:
<TABLE>
<CAPTION> Minimum
September 30, December 31, Regulatory
1995 1994 Requirements
---- ---- ------------
<S> <C> <C> <C>
Shareholders' Equity/Total Assets 11.53% 11.16% -
Primary Capital Ratio 12.49% 12.13% -
Risk-Adjusted Capital:
Tier I 17.41% 17.86% 4.00%
Tier I and II 18.57% 19.65% 8.00%
Leverage 11.44% 11.19% 3.00%
</TABLE>
Management is not aware of trends, events, or uncertainties, either favorable or
unfavorable, that are likely to have a material effect on Horizon's liquidity,
capital resources or results of operations. There are no current recommendations
by regulatory authorities that, if implemented, would have a material effect on
Horizon.
20
<PAGE> 21
HORIZON BANCORP, INC.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings, other than ordinary litigation incidental to
the business, to which Horizon Bancorp or any of its subsidiaries are a party to
or of which any of their property is subject. Management believes that the
liability, if any, resulting from current litigation will not be material to
the reported financial statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
11. Statement of Computation of Earnings per Share - attached.
27. Financial Data Schedule.
B. Reports on Form 8-K
No reports on Form 8-K have been filed during 1995.
21
<PAGE> 22
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, INC.
--------------------------
(Registrant)
Date: October 20, 1995 /s/ Frank S. Harkins, Jr.
---------------- --------------------------
Frank S. Harkins, Jr.
Chairman of the Board
Date: October 20, 1995 /s/ David W. Hambrick
---------------- --------------------------
David W. Hambrick
Executive Vice President and
Chief Financial Officer
22
<PAGE> 1
HORIZON BANCORP, INC.
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY:
Average shares outstanding 2,831,917 2,835,670 2,834,394 2,835,670
Net effect of options 2,290 0 989 0
---------- ---------- ---------- ----------
Total 2,834,207 2,835,670 2,835,383 2,835,670
========== ========== ========== ==========
Net Income $2,122,000 $1,021,000 $6,269,000 $5,349,000
========== ========== ========== ==========
Earnings Per Share $0.75 $0.71 $2.21 $1.89
===== ===== ===== =====
FULLY DILUTED:
Average share outstanding 2,831,917 2,835,670 2,834,394 2,835,670
Net effect of options 3,188 0 3,188 0
---------- ---------- ---------- ----------
Total 2,835,105 2,835,670 2,837,582 2,835,670
========== ========== ========== ==========
Net Income $2,122,000 $1,743,000 $6,269,000 $5,349,000
========== ========== ========== ==========
Earnings Per Share $0.75 $0.71 $2.21 $1.89
===== ===== ===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000730025
<NAME> HORIZON BANCORP
<MULTIPLIER> 1,000,000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 18,213
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,025
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 69,576
<INVESTMENTS-CARRYING> 81,079
<INVESTMENTS-MARKET> 81,803
<LOANS> 413,133
<ALLOWANCE> 6,594
<TOTAL-ASSETS> 602,677
<DEPOSITS> 508,368
<SHORT-TERM> 18,527
<LIABILITIES-OTHER> 6,257
<LONG-TERM> 0
<COMMON> 2,835
0
0
<OTHER-SE> 66,680
<TOTAL-LIABILITIES-AND-EQUITY> 602,667
<INTEREST-LOAN> 26,913
<INTEREST-INVEST> 6,763
<INTEREST-OTHER> 490
<INTEREST-TOTAL> 34,166
<INTEREST-DEPOSIT> 12,807
<INTEREST-EXPENSE> 13,183
<INTEREST-INCOME-NET> 20,983
<LOAN-LOSSES> 785
<SECURITIES-GAINS> (131)
<EXPENSE-OTHER> 13,116
<INCOME-PRETAX> 9,279
<INCOME-PRE-EXTRAORDINARY> 9,279
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,269
<EPS-PRIMARY> 2.21
<EPS-DILUTED> 2.21
<YIELD-ACTUAL> 5.30
<LOANS-NON> 2,632
<LOANS-PAST> 1,720
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,328
<CHARGE-OFFS> 823
<RECOVERIES> 304
<ALLOWANCE-CLOSE> 6,594
<ALLOWANCE-DOMESTIC> 6,594
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 725
</TABLE>
