<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 MARCH 31, 1996 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
incorporation or organization) Identification No.)
BOX D, BECKLEY, WV 25802-2803
- ------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
(304) 255-7000
------------------------------------------------------------------
(Registrant's telephone number, including area code)
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.
COMMON STOCK, $1.00 PAR VALUE 2,830,130 SHARES
------------------------------ -----------------------------
Class Outstanding at April 25, 1996
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HORIZON BANCORP, INC.
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-March 31, 1996 and December 31, 1995
Condensed Consolidated Statements of Income for The Three Months
Ended March 31, 1996 and 1995
Condensed Consolidated Statements of Shareholders' Equity for The
Three Months Ended March 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows for The Three
Months Ended March 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
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
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- -------------------------------------------------------------------------------
HORIZON BANCORP, INC.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
--------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 18,756 $ 19,680
Federal funds sold 3,780 2,400
--------------------------
Cash and cash equivalents 22,536 22,080
Investment securities:
Available-for-sale, at fair value 113,827 115,120
Held-to-maturity, at cost (approximate
fair value of $33,327 at March 31, 1996
and $34,745 at December 31, 1995) 33,201 34,413
Loans:
Total loans 429,065 426,402
Less: Allowance for loan losses (6,564) (6,522)
--------------------------
Net loans 422,501 419,880
Premises and equipment, net 10,435 10,209
Accrued interest receivable and other assets 13,748 13,043
--------------------------
Total assets $616,248 $614,745
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 73,740 $ 74,558
Interest bearing 446,897 439,917
--------------------------
Total deposits 520,637 514,475
Short-term borrowings 14,769 20,941
Accrued interest payable and other liabilities 9,064 8,222
--------------------------
Total liabilities 544,470 543,638
Shareholders' equity:
Common stock, $1 par value; 5,000,000 shares
authorized; 2,835,670 shares outstanding at
March 31, 1996 and December 31, 1995,
including 5,540 shares in treasury 2,835 2,835
Capital surplus 12,262 12,262
Retained earnings 56,273 55,001
Treasury stock (175) (175)
Unrealized gain on available-for-sale securities 583 1,184
--------------------------
Total shareholders' equity 71,778 71,107
--------------------------
Total liabilities and shareholders' equity $616,248 $614,745
==========================
</TABLE>
See notes to consolidated financial statements.
3
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- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- -------------------------------------------------------------------------------
HORIZON BANCORP, INC.
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
1996 1995
-------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 9,907 $ 8,411
Interest and dividends on investment securities:
Taxable 1,698 1,746
Tax-exempt 512 515
Federal funds sold and other 62 141
-----------------------
Total interest income 12,179 10,813
Interest expense:
Deposits 4,750 3,773
Short-term borrowings 141 113
-----------------------
Total interest expense 4,891 3,886
-----------------------
Net interest income 7,288 6,927
Provision for loan losses 335 217
-----------------------
Net interest income after provision
for loan losses 6,953 6,710
Other income:
Service charges and fees 450 423
Investment securities losses (1) (131)
Other 338 311
-----------------------
Total other income 787 603
Other expenses:
Salaries and employee benefits 2,191 2,056
Net occupancy and equipment expense 637 559
Outside data processing 237 216
Federal deposit insurance 2 268
Advertising 93 71
Other 1,386 1,079
-----------------------
Total other expenses 4,546 4,249
-----------------------
Income before income taxes 3,194 3,064
Applicable income taxes 1,073 983
-----------------------
Net income $ 2,121 $ 2,081
=======================
Net income per common share $0.75 $0.73
=======================
Average common shares outstanding 2,830 2,835
=======================
</TABLE>
See notes to consolidated financial statements.
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- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERSO EQUITY (UNAUDITED)
- --------------------------------------------------------------------------------
HORIZON BANCORP, INC.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON
AVAILABLE DEFERRED
COMMON CAPITAL RETAINED TREASURY FOR SALE ESOP
STOCK SURPLUS EARNINGS STOCK SECURITIES BENEFITS TOTAL
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 $2,835 $12,262 $55,001 $(175) $ 1,184 $ -- $71,107
Three months ended March 31, 1996:
Net income -- -- 2,121 -- -- -- 2,121
Cash dividends ($0.30 per share) -- -- (849) -- -- -- (849)
Change in unrealized gain on
available-for-sale securities,
net of deferred income taxes -- -- -- -- (601) -- (601)
---------------------------------------------------------------------------------------
Balances at March 31, 1996 $2,835 $12,262 $56,273 $(175) $ 583 $ -- $71,778
=======================================================================================
Balances at December 31, 1994 $2,835 $12,262 $49,903 $ -- $(1,297) $(121) $63,582
Three months ended March 31, 1995:
Net income -- -- 2,081 -- -- -- 2,081
Cash dividends ($0.25 per share) -- -- (709) -- -- -- (709)
Change in unrealized loss on
available-for-sale securities,
net of deferred income taxes -- -- -- -- 927 -- 927
Reduction in ESOP indebtedness -- -- -- -- -- 35 35
---------------------------------------------------------------------------------------
Balances at March 31, 1995 $2,835 $12,262 $51,275 $ -- $ (370) $ (86) $65,916
=======================================================================================
</TABLE>
See notes to consolidated financial statements.
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- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
HORIZON BANCORP, INC.
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
1996 1995
------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,121 $ 2,081
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and Amortization 298 274
Provision for loan losses 335 217
Loss on sale of investment securities 1 131
Change in accrued interest receivable and other assets (705) 460
Change in accrued interest payable and other liabilities 842 698
------------------------
Net cash provided by operating activities 2,892 3,861
INVESTING ACTIVITIES
Proceeds from sales of available-for-sale securities 99 5,128
Proceeds from maturities of available-for-sale securities 5,277 1,500
Purchases of available-for-sale securities (4,689) (11,535)
Proceeds from maturities of held-to-maturity securities 1,212 13,201
Purchases of held-to-maturity securities -- (767)
Net increase in loans (2,955) (4,353)
Purchases of premises and equipment (521) (1,850)
Cash received in purchase of branches, net of cash paid -- 2,888
------------------------
Net cash (used in) provided by investing activities (1,577) 4,212
FINANCING ACTIVITIES
Net increase (decrease) in deposits 6,162 (4,545)
Net (decrease) increase in short-term borrowings (6,172) 2,338
Cash dividends paid (849) (709)
------------------------
Net cash used in financing activities (859) (2,916)
------------------------
Net increase in cash and cash equivalents 456 5,157
Cash and cash equivalents at beginning of period 22,080 24,432
------------------------
Cash and cash equivalents at end of period $22,536 $29,589
========================
</TABLE>
See notes to consolidated financial statements.
6
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- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
HORIZON BANCORP, INC.
MARCH 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
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 three month period ended March 31, 1996, are not
necessarily indicative of the results to be expected for the year ending
December 31, 1996.
These financial statements are to be read in conjunction with the financial
statements and notes included in the 1995 Annual Report and Form 10-K of
Horizon Bancorp, Inc.
- --------------------------------------------------------------------------------
NOTE 2. MERGERS AND ACQUISITIONS
- --------------------------------------------------------------------------------
Horizon has entered into a definitive agreement to acquire all of the
outstanding common stock of Twentieth Bancorp, Inc. ("Twentieth"),
headquartered in Huntington, West Virginia. Horizon will exchange 1.01
shares of its common stock for each share of Twentieth's common stock
outstanding which will result in the issuance of 1,818,000 shares of
Horizon common stock. This business combination is expected to be accounted
for as a pooling of interests. The pooling of interests method requires
the combining of the financial information of the merging companies as
though they had always been combined. The results of operations of the
separate companies are summarized as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
1996 1995
------------------------
<S> <C> <C>
Net interest income:
Horizon $ 7,288 $ 6,927
Twentieth 3,553 3,714
------------------------
Proforma $10,841 $10,641
========================
Net income:
Horizon $ 2,121 $ 2,081
Twentieth 712 903
========================
Proforma $ 2,833 $ 2,984
========================
Net income per common share:
Horizon $0.75 $0.73
Twentieth 0.40 0.50
Proforma 0.61 0.64
</TABLE>
Horizon expects to receive regulatory and shareholder approvals and complete
its acquisition of Twentieth in the third quarter of 1996.
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- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 3. INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
Management determines the appropriate classification of securities
at the time of purchase. Debt securities are classified as
held-to-maturity when Horizon has the positive intent and ability to hold
the securities to maturity. Held-to- maturity securities are stated at
amortized cost.
Debt securities not classified as held-to-maturity and marketable equity
securities are classified as available-for-sale. Available-for-sale securities
are stated at fair value, with the unrealized gains and losses, net of
deferred income taxes, reported in a separate component of shareholders'
equity. Horizon does not hold investment securities for trading purposes.
The amortized cost and estimated fair values of investment securities are as
follows:
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-----------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury securities and obligations of U.S.
government agencies and corporations $ 87,166 $ 1,049 $ (406) $ 87,809
Obligations of states and political subdivisions 8,072 91 (22) 8,141
Mortgage-backed securities 8,970 110 (105) 8,975
Other debt securities 3,449 72 -- 3,521
Other equity securities 5,247 163 (29) 5,381
-----------------------------------------------------------
Totals $112,904 $ 1,485 $ (562) $113,827
===========================================================
HELD-TO-MATURITY SECURITIES
Obligations of states and political subdivisions $ 33,201 $ 126 $ -- $ 33,327
===========================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-----------------------------------------------------------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
U.S. Treasury securities and obligations of U.S.
government agencies and corporations $ 87,161 $1,919 $(232) $ 88,848
Obligations of states and political subdivisions 8,072 116 (16) 8,172
Mortgage-backed securities 9,419 124 (71) 9,472
Other equity securities 8,502 151 (25) 8,628
-----------------------------------------------------------
Totals $113,154 $2,310 $(344) $115,120
===========================================================
HELD-TO-MATURITY SECURITIES
U.S. Treasury securities and obligations of U.S.
government agencies and corporations $ 1,000 $ -- $ -- $ 1,000
Obligations of states and political subdivisions 33,413 502 (170) 33,745
-----------------------------------------------------------
Totals $ 34,413 $ 502 $(170) $ 34,745
===========================================================
</TABLE>
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- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- -------------------------------------------------------------------------------
NOTE 4. ALLOWANCE FOR LOAN LOSSES
- -------------------------------------------------------------------------------
A summary of changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
MARCH 31
1996 1995
--------------------
<S> <C> <C>
Balance at beginning of period $6,522 $6,328
Charge-offs (390) (236)
Recoveries 97 103
--------------------
Net charge-offs (293) (133)
Provision for loan losses 335 217
--------------------
Balance at end of period $6,564 $6,412
====================
Allowance for loan losses as a % of total loans 1.53% 1.67%
Earnings coverage of net charge-offs 7.24X 15.65X
</TABLE>
- -------------------------------------------------------------------------------
NOTE 5. NEW ACCOUNTING STANDARD
- -------------------------------------------------------------------------------
The FASB issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," which is applicable to Horizon
in 1996. This Statement provides companies with the option of accounting
for stock-based compensation under APB Opinion No. 25, "Accounting for
Stock Issued to Employees," or applying the provisions of Statement 123.
As allowed by Statement No. 123, Horizon has elected to continue accounting
for stock-based compensation under Opinion 25. Horizon 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 in its 1996 annual report to shareholders.
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- -------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
INTRODUCTION
Horizon Bancorp, Inc., ("Horizon") is a multi-bank holding company
headquartered in Beckley, West Virginia. Horizon engages in commercial banking
activities and provides financial and trust services to individuals and
commercial customers primarily in Fayette, Greenbrier, Pocahontas, Raleigh,
and Summers Counties of West Virginia.
The following discussion and analysis is provided to assist readers of
the consolidated financial statements in understanding the operating
performance of Horizon. This discussion should be read in conjunction with
the December 31, 1995 consolidated financial statements and the
accompanying notes to the financial statements included in the 1995 annual
report.
Throughout the following discussion, dollars are expressed in thousands,
except per share data.
RESULTS OF OPERATIONS
Horizon reported consolidated net income for the first three months of
1996 of $2,068, or $0.73 per share, compared with $2,121, or $0.75 per
share, in the same quarter of 1995.
Return on average assets (ROA) measures how effectively Horizon uses its
assets to produce net income while return on average equity (ROE) measures
income earned compared with the amount of shareholders' investment in
Horizon. For the three months ended March 31, 1996, Horizon's ROA was 1.38%,
compared to 1.47% for the three months ended March 31, 1995. For the three
months ended March 31, 1996, Horizon's ROE totaled 11.80%, compared to 12.79%
for the three months ended March 31, 1995.
NET INTEREST INCOME
Net interest income is Horizon's largest source of earnings. Net interest
income is influenced by the volume and relative yield (cost) of earning
assets and interest-bearing liabilities and the relative sensitivity of such
assets and liabilities to changes in interest rates. Interest income is
presented and discussed on a fully tax-equivalent basis.
Net interest income increased $226 or 3.13% in the first three months of
1996, from $7,232 reported for the first three months of 1995. Both
interest income and interest expense increased when comparing the first
three months of 1996 with 1995. The increase in interest income resulted
from an increase in volume and yield on average interest-earning assets and
changes in the mix of earning assets. Average loans, Horizon's highest
yielding assets, increased $45,788 or 12.08% in volume and the yield
increased 40 basis points during the first quarter of 1996 from the first
quarter of 1995. The increase in loan volume and yield accounts for the
majority of the increase in net interest income. These increases are
representative of the current economic activity and efforts by management
to extend its market share.
The following table summarizes the composition of average interest-earning
assets and average interest-bearing liabilities, along with the related income
or expense and the weighted average yield or cost of such funds.
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<TABLE>
<CAPTION>
NET INTEREST MARGIN
--------------------------------------------------------------------
MARCH 31, 1996 MARCH 31, 1995
--------------------------------------------------------------------
AVERAGE/ INCOME/ YIELD/ AVERAGE/ INCOME/ YIELD/
BALANCE EXPENSE COST BALANCE EXPENSE COST
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Federal funds sold $ 4,799 $ 62 5.2% $ 8,671 $ 141 6.5%
Investment securities:
Taxable 106,073 1,698 6.4 108,986 1,746 6.4
Tax exempt(1) 34,434 662 7.7 41,059 780 7.6
--------------------------------------------------------------------
Total investment securities 140,507 2,360 6.7 150,045 2,526 6.7
Total loans(1)(2) 424,885 9,927 9.3 379,097 8,451 8.9
--------------------------------------------------------------------
Total earning assets
and interest income 570,191 12,349 8.7 537,813 11,118 8.3
Noninterest earning assets:
Cash and due from banks 17,298 16,484
Premises and equipment 10,231 7,441
Other assets 22,038 12,121
Less: Allowance for loan losses (6,477) (6,328)
-------- --------
Total assets $613,281 $567,531
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 81,198 $ 542 2.7% $ 86,340 $ 581 2.7%
Savings deposits 110,612 919 3.3 120,809 964 3.2
Certificates of deposit 248,965 3,289 5.3 206,149 2,228 4.3
---------------------------------------------------------------------
Total interest-bearing deposits 440,775 4,750 4.3 413,298 3,773 3.7
Short-term borrowings 17,491 141 2.8 16,904 113 2.7
---------------------------------------------------------------------
Total interest-bearing
liabilities and interest
expense 458,266 4,891 4.3 430,202 3,886 3.6
----------------- ------------------
Noninterest-bearing liabilities:
Demand deposits 73,534 68,458
Other 9,597 3,805
-------- --------
Total liabilities 541,397 502,465
Shareholders' equity 71,884 65,066
-------- --------
Total liabilities and
shareholders' equity $613,281 $567,531
======== ========
Net interest income $7,458 $7,232
====== ======
Spread 4.4% 4.7%
==== ====
Net interest margin 5.2% 5.4%
==== ====
</TABLE>
(1) Fully taxable equivalent using 35%.
(2) Nonaccrual loans are included in average balances.
Horizon's net interest margin decreased 20 basis points to 5.20% for the first
quarter of 1996 from 5.40% during the first quarter of 1995. The decrease in
margin is due to the increase in cost of funds, primarily certificates of
deposit, outpacing the increase in yield on earning assets.
Average interest-bearing liabilities increased $28,064 or 6.52% in the three
months ended March 31, 1996 from $430,202 during the three months ended March
31, 1995. The related cost of
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funds increased 70 basis points, primarily due to a 100 basis point increase
in cost of certificates of deposit and the shifting of deposits to these
higher yielding accounts.
ALLOWANCE FOR LOAN LOSSES
During the first three months of 1996, the allowance remained stable
through a provision for loan losses of $335 compared to $217 for the same
quarter of 1995. Net charge-offs were $293 for the three months ended March
31, 1996, compared to $133 for the same period in 1995. The increase is
attributable to an increase of $82 in consumer charge-offs, primarily related
to growth in the credit card department, and a $70 increase in commercial
charge-offs. The increase in commercial charge-offs was due to a $40 charge-off
on a commercial loan in 1996 as opposed to a $30 recovery in 1995.
Total nonperforming loans were 1.22% of total loans at March 31, 1996, a
decrease from the 1.30% at December 31, 1995. At March 31, 1996,
nonperforming assets were 0.94% of total assets, a decrease from the 0.98%
at December 31, 1995.
Nonaccrual loans increased $533 to $2,897 during the first three months of
1996 from a 1995 year-end total of $2,364, primarily due to a commercial
borrower with cash flow problems. Loans 90 days or more delinquent and
still accruing interest decreased 26.18% from $3,167 at December 31, 1995, to
$2,338 at March 31, 1996. The migration of the aforementioned commercial
loan, as well as other loans, from 90 days or more delinquent and still
accruing to nonaccrual status along with increased collection efforts
account for the decrease.
At March 31, 1996, the allowance for loan losses as a percentage of
total loans was 1.53%, unchanged December 31, 1995.
<TABLE>
<CAPTION>
ANALYSIS OF ASSET
QUALITY
-------------------------
MARCH 31 DECEMBER 31
1996 1995
-------------------------
<S> <C> <C>
Nonaccruing loans $2,897 $2,364
Loans ninety days past due and accruing interest 2,338 3,167
---------------------
Total nonperforming loans 5,235 5,531
Other real estate owned 533 503
---------------------
Total nonperforming assets $5,768 $6,034
=====================
Nonperforming loans to total loans 1.22% 1.30%
Nonperforming assets to total assets 0.94% 0.98%
Allowance for loan losses to nonperforming loans 125.39% 117.92%
</TABLE>
NONINTEREST INCOME
Noninterest income is primarily of a fee nature and consists of service
charges on deposits, trust department income, and a variety of
miscellaneous transactions. Noninterest income increased $184 or 30.51%
during the three months ended March 31, 1996 from the $603 reported in the
same period in 1995. The increase is due to a decline of $130 in
investment securities losses, a $27 increase in service charges, and a $27
increase in other income. The investment security losses incurred in the
first quarter of 1995 were to take advantage of higher yielding investments.
Service charges increased due to higher deposit balances along with
increased transactions subject to service charges. Trust income, a
component of other income, increased 8%.
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NONINTEREST EXPENSE
Noninterest expense is frequently referred to as overhead; that is the cost
of normal operations. Horizon's noninterest expense for the three months
ended March 31, 1996, increased $297 or 6.99% over the three months ended
March 31, 1995. The increased cost directly relates to Horizon's
continuing commitment to enhance its information systems and customer
service through additional technology. Salaries and employee benefits
increased $135 or 6.57%, of which $102 or 75.56% was due to the additional
staffing costs related to the purchase of four branches from a regional
bank in the first and second quarters of 1995. Net occupancy and equipment
expenses increased $78 or 13.95% in the first quarter of 1996 compared to
the first quarter of 1995 due to increased depreciation charges related
to the branch acquisition and additional data processing equipment. Federal
deposit insurance decreased $266 to the statutory minimum of $2 as the
FDIC has lowered assessments on soundly capitalized institutions. Other
expenses increased $307 for the first three months of 1996 over the same
period of 1995. The increase is primarily due to investment banking fees
of $180 related to potential acquisitions, an increase of $47 in costs of
operations for the credit card department due to growth of the department,
and a $25 increase in postage expense.
INCOME TAXES
Income tax expense expressed as a percentage of income before income taxes
was 34.16% for the three months ended March 31, 1996, and compares to 32.08%
for the three months ended March 31, 1995. The higher effective tax rate for
the first quarter of 1996 compared to the same period in 1995 reflects a
lower ratio of tax exempt income to income before income taxes.
BALANCE SHEET ANALYSIS
At March 31, 1996, total assets increased $1,503 or 0.24% from the December
31, 1995 total of $614,745.
Federal funds sold increased $1,380 or 57.50% from the December 31, 1995,
total of $2,400. The increase is due to loan commitments expected to
be funded in the second quarter of 1996. 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 $147,028 at March 31, 1996, and have
decreased $2,505 or 1.68% from the December 31, 1995 total of $149,533.
This is attributable to loan demand and reflects management's strategy to
fund portions of loan growth through maturities of investment securities.
Growth in total loans has been evidenced by stronger loan demand in the first
quarter of 1996. For the three months ended March 31, 1996, total loans
increased $2,663 or 0.62%. Commercial loan growth represented 93.80% of
the increase reflecting more favorable economic conditions in the market
area.
Net premises and equipment have increased $226 or 2.21% from $10,209 at
December 31, 1995 to $10,435 at March 31, 1996. A major portion of the
increase was due to the purchase of additional data processing equipment.
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<PAGE> 14
Total deposits at March 31, 1996 were $520,637 and have increased $6,162 or
1.20% from the December 31, 1995 total of $514,475. This increase is
primarily due to a rise of $6,980 or 1.59% in interest-bearing liabilities
obtained as a result of higher rates paid on certificates of deposit.
At March 31, 1996, short-term borrowings approximated $13,769 in 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. The FHLB borrowing is a one-year term note indexed to the prime
rate and was used to fund a portion of a commercial loan.
Shareholders' equity increased $671 or 0.94% from the total at December 31,
1995, primarily from retention of earnings and the decline in unrealized
gain on available-for-sale securities of $601 from $1,184 at December 31,
1995 to $583 at March 31, 1996. This decline is due to increasing interest
rates.
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 provide 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 and monitored
closely by management. Due to Horizon's stable core deposit base,
management has been able to effectively manage interest rate risk without
the use of derivative products.
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 March 31, 1996, shareholders' equity
included an unrealized net gain on available-for-sale investments of $583.
Because bond rates increased slightly in the first quarter of 1996, the
unrealized net gain on available-for-sale securities changed from an
unrealized net gain of $1,184 at December 31, 1995 to an unrealized net gain
of $583 at March 31, 1996.
Shareholders' equity when expressed as a percentage of total assets
totaled 11.65% on March 31, 1996, an increase from the 11.57% reported at
December 31, 1995. The primary capital ratio, which includes equity and the
allowance for loan losses, was 12.58% on March 31, 1996, and has increased
slightly from the 12.50% reported on December 31, 1995. The Federal
regulatory agencies have adopted risk-based capital guidelines and Horizon
continues to be well above the minimum guidelines for all risk-based ratios.
14
<PAGE> 15
Pertinent capital ratios were:
<TABLE>
<CAPTION>
Minimum Regulatory
March 31, 1996 December 31, 1995 Requirements
-------------------------------------------------------
<S> <C> <C> <C>
Shareholders' Equity/Total Assets 11.65% 11.57%
Primary Captial Ratio 12.58% 12.50%
Risk-Adjusted Captial
Tier I 17.74% 17.96% 4.00%
Tier II 19.39% 19.21% 8.00%
Leverage 11.49% 11.31% 3.00%
</TABLE>
Management is not aware of any 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.
15
<PAGE> 16
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
27. Financial Data Schedule
B. Reports on Form 8-K
A report on Form 8-K pertaining to the Twentieth Bancorp acquisition
was filed on February 23, 1996.
16
<PAGE> 17
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: April 25, 1996 /s/ Frank S. Harkins, Jr.
-------------- -------------------------
Frank S. Harkins, Jr.
Chairman of the Board
Date: April 25, 1996 /s/ C. Duane Blankenship
-------------- ------------------------
C. Duane Blankenship
Chief Financial Officer
17
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
1996 1995
----------------------------
<S> <C> <C>
PRIMARY:
Average shares outstanding 2,830,130 2,835,670
Net effect of options 2,115 85
----------------------------
Total 2,832,230 2,835,755
============================
Net income $2,121,000 $2,081,000
Earnings per share $0.75 $0.73
============================
FULLY DILUTED:
Average shares outstanding 2,830,130 2,835,670
Net effect of options 2,492 85
----------------------------
Total 2,832,622 2,835,755
============================
Net income $2,121,000 $2,081,000
============================
Earnings per share $0.75 $0.73
============================
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000730025
<NAME> HORIZON BANCORP
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 18,756
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,780
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 113,827
<INVESTMENTS-CARRYING> 33,201
<INVESTMENTS-MARKET> 33,327
<LOANS> 429,065
<ALLOWANCE> 6,564
<TOTAL-ASSETS> 616,248
<DEPOSITS> 520,637
<SHORT-TERM> 14,769
<LIABILITIES-OTHER> 9,064
<LONG-TERM> 0
<COMMON> 2,835
0
0
<OTHER-SE> 68,943
<TOTAL-LIABILITIES-AND-EQUITY> 616,248
<INTEREST-LOAN> 9,907
<INTEREST-INVEST> 2,210
<INTEREST-OTHER> 62
<INTEREST-TOTAL> 12,179
<INTEREST-DEPOSIT> 4,750
<INTEREST-EXPENSE> 4,891
<INTEREST-INCOME-NET> 7,288
<LOAN-LOSSES> 335
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 4,546
<INCOME-PRETAX> 3,194
<INCOME-PRE-EXTRAORDINARY> 3,194
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,121
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
<YIELD-ACTUAL> 5.20
<LOANS-NON> 2,897
<LOANS-PAST> 2,338
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,652
<CHARGE-OFFS> 390
<RECOVERIES> 97
<ALLOWANCE-CLOSE> 6,564
<ALLOWANCE-DOMESTIC> 6,564
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 670
</TABLE>
