FORM 10-Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 34-26589, eff. 4/12/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31, 1995
OR
[ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-12668
Hills Bancorporation
(Exact name of registrant as specified in its charter)
Iowa 42-1208067
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
131 Main Street, Hills, Iowa 52235
(Address of principal executive offices) (Zip code)
(319) 679-2291
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since
last report)
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. [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
SHARES OUTSTANDING
CLASS AT APRIL 30, 1995
Common Stock, no par value 487,773
<PAGE>
HILLS BANCORPORATION
Index to Form 10-Q
Part I
FINANCIAL INFORMATION
Page
Number
Item 1. Financial Statements
Consolidated balance sheets, March 31, 1995 (unaudited)
and December 31, 1994
Consolidated statements of income, (unaudited) for three
months ended March 31, 1995 and 1994
Consolidated statement of stockholders' equity,
(unaudited) for three months ended March 31, 1995
and 1994
Consolidated statements of cash flows (unaudited) for
three months ended March 31, 1995 and 1994
Note to 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 2. Changes in securities
Item 3. Defaults upon senior securities
Item 4. Submission of matters to vote of security holders
Item 5. Other information
Item 6. Exhibits and reports on Form 8-K
COMPUTATION OF EARNINGS PER SHARE
SIGNATURES
<PAGE>
HILLS BANCORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31,
1995 December 31,
ASSETS Unaudited 1994*
Cash and due from banks $ 9,804 $ 10,805
Investment securities:
Available for sale (amortized cost March 31,
1995 $94,303; December 31, 1994 $94,914) 91,977 90,795
Held to maturity (fair value March 31, 1995
$19,450; December 31, 1994 $19,561) 19,459 19,255
Federal funds sold 788 7,500
Loans, net 307,204 300,821
Property and equipment, net 6,527 6,350
Accrued interest receivable 4,173 3,776
Deferred income taxes, net 2,271 2,935
Other assets 2,687 2,675
$444,890 $444,912
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest-bearing deposits $ 36,350 $ 35,470
Interest-bearing deposits 328,439 337,368
Total deposits $364,789 $372,838
Federal funds purchased and securities
sold under agreements to repurchase 8,541 7,043
Federal Home Loan Bank notes 25,758 20,758
Accrued interest payable 1,519 1,548
Other liabilities 1,548 1,068
$402,155 $403,255
REDEEMABLE COMMON STOCK HELD BY
EMPLOYEE STOCK OWNERSHIP PLAN
(ESOP) $ 5,265 $ 5,210
STOCKHOLDERS' EQUITY
Capital stock, common, no par value; authorized
2,000,000 shares; issued 487,773 shares $ 8,915 $ 8,915
Retained earnings 35,285 35,336
Unrealized gains (losses) on debt securities, net (1,465) (2,594)
$ 42,735 $ 41,657
Less, maximum cash obligation related to ESOP
shares 5,265 5,210
$ 37,470 $ 36,447
$444,890 $444,912
* Derived from audited financial statements. See Note to Consolidated
Financial Statements.
<PAGE>
HILLS BANCORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1995 and 1994
(In Thousands, Except Per Share Data)
1995 1994
Interest income:
Interest and fees on loans $ 6,411 $ 5,455
Interest on investment securities
Taxable 1,194 1,291
Non taxable 261 267
Interest on federal funds sold 40 48
Total interest income $ 7,906 $ 7,061
Interest expense:
Interest on deposits $ 3,669 $ 3,328
Interest on securities sold under
agreements to repurchase 92 34
Interest on FHLB notes 366 245
Interest portion of Employee Stock
Ownership Plan contribution - - 2
Total interest expense $ 4,127 $ 3,609
Net interest income $ 3,779 $ 3,452
Provision for loan losses 180 180
Net interest income after
provision for loan losses $ 3,599 $ 3,272
Other income:
Loan origination fees $ 19 $ 174
Trust fees 151 179
Deposit account charges and fees 373 349
Other fees and charges 250 232
$ 793 $ 934
Other expenses:
Salaries and employee benefits $ 1,340 $ 1,299
Occupancy 190 175
Furniture and equipment 253 234
F.D.I.C. insurance 209 198
Office supplies and postage 177 152
Other 541 541
$ 2,710 $ 2,599
Income before income taxes $ 1,682 $ 1,607
Federal and state income taxes $ 465 $ 436
Net income $ 1,217 $ 1,171
Per common share:
Net income $ 2.48 $ 2.40
Dividend, January 2.60 2.41
Weighted average of common outstanding
stock 490,799 488,691
See Note to Consolidated Financial Statements
<PAGE>
HILLS BANCORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended March 31, 1995 and 1994
(In Thousands)
Total
Balance, January 1, 1995 $ 36,447
Net income 1,217
Change related to ESOP shares (55)
Cash dividends ($2.60 per share) (1,268)
Unrealized gains (losses) on debt securities, net 1,129
Balance, March 31, 1995 $ 37,470
Balance, January 1, 1994 $ 35,943
Net income 1,171
Payment on debt of ESOP 131
Change related to ESOP shares 32
Cash dividends ($2.40 per share) (1,170)
Unrealized gains (losses) on debt securities, net (1,096)
Balance, March 31, 1994 $ 35,011
See Note to Consolidated Financial Statements.
<PAGE>
HILLS BANCORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1995 and 1994
(In Thousands)
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,217 $ 1,171
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 202 178
Provision for loan losses 180 180
(Increase) in accrued interest receivable (397) (48)
Amortization of bond discount 138 223
(Increase) in other assets (12) (192)
Increase in accrued interest and other
liabilities 451 516
Net cash provided by operating activities $ 1,779 $ 2,028
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investment securities:
Available for sale $ 4,000 $ 9,000
Held to maturity 330 615
Purchase of investment securities:
Available for sale (3,510) (8,084)
Held to maturity (551) (738)
Federal funds sold, net 6,712 533
Loans made to customers, net of collections (6,563) (2,944)
Purchases of property and equipment (379) (26)
Net cash provided by (used in)
investing activities $ 39 $ (1,644)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits $ (8,049) $ (30)
Net increase (decrease) in federal funds
purchased and securities sold under
agreements to repurchase 1,498 (29)
Borrowings from FHLB 5,000 - -
Dividends paid (1,268) (1,170)
Net cash (used in) financing activities $ (2,819) $ (1,229)
(Decrease) increase in cash and due from banks $ (1,001) $ (845)
CASH AND DUE FROM BANKS
Beginning 10,805 10,107
Ending $ 9,804 $ 9,262
SUPPLEMENTAL DISCLOSURES
Cash payments for:
Interest paid to depositors and others $ 3,698 $ 3,393
Interest paid on other obligations 458 281
Non-cash financing transactions:
Increase in stockholders' equity related
to ESOP debt - - 132
Increase in maximum cash obligation related
to ESOP shares (55) (32)
Net unrealized gains (losses) on debt
securities 1,129 (1,096)
See Note to Consolidated Financial Statements.
<PAGE>
HILLS BANCORPORATION
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Interim Financial Statements
Interim consolidated financial statements have not been examined
by independent public accountants, but include all adjustments
(consisting only of normal recurring accruals) which, in the
opinion of management, are necessary for a fair presentation of
the results for these periods. The results of operation for the
interim periods are not necessarily indicative of the results for
a full year.
For purposes of reporting cash flows, cash and due from banks
includes cash on hand and amounts due from banks (including cash
items in process of clearing). Cash flows from demand deposits,
NOW accounts, savings accounts, and federal funds purchased and
sold are reported net since their original maturities are less
than three months. Cash flows from loans and time deposits are
presented as net increases or decreases.
PART I, ITEM 2.
HILLS BANCORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS OF OPERATION
The consolidated balance sheet of Hills Bancorporation as of March 31,
1995 reflects total assets of $444,890,000 which is a slight decrease of
$22,000 from December 31, 1994. Net loans are $307,204,000 which
represents an increase of $6,383,000 from December 31, 1994. Compared to
one year ago, total assets have increased from $416,404,000 to
$444,890,000 for an increase of $28,486,000. Also during this time, net
loans increased $41,464,000 to $307,204,000 as of March 31, 1995. These
loan increases were primarily single family residential loans in the Iowa
City and Coralville area. By March 31, 1995, the U.S. Government bond
interest rates, after increasing during 1994, have decreased back to
yields effective in December, 1994. The changes in rates have a direct
effect on secondary market financing and also on other income for the Bank
in terms of loan origination fees. At this time, loan demand for in-house
real estate loans appears to be strong and the funding of these loans will
come from deposit growth and/or FHLB advances.
On the liability side of the bank, deposits (when federal funds purchased
and securities sold under agreements to repurchase are included) as of
March 31, 1995 totaled $373,330,000, a decrease of $6,551,000 for the
first three months. March 31, 1995 deposits, including repos, have grown
$15,414,000 from March 31, 1994. Also during the last twelve months,
borrowings from the FHLB has increased from $15,790,000 to $25,758,000.
Asset-liability management encompasses both the management of interest
rate sensitivity and the maintenance of adequate liquidity. Interest rate
sensitivity management attempts to provide the optimal level of net
interest income while managing exposure to risks associated with interest
rate movements. Liquidity management involves planning to meet
anticipated funding needs. Management monitors the rate sensitivity and
liquidity positions on an on-going basis and, when necessary, appropriate
action is taken to minimize any adverse effects of rapid interest rate
movements or any unexpected liquidity concerns.
<PAGE>
In January of 1995, Hills Bancorporation paid a dividend of $2.60 per
share. The dividend of $2.60 per share represents an 8.33% increase from
the $2.40 paid in January, 1994. The total dividend of $1,268,000 is
deducted from stockholders' equity and is reflected in the resulting
stockholders' equity as of March 31, 1995 of $37,470,000. Stockholders'
equity at March 31, 1995 and December 31, 1994 reflects an adjustment for
unrealized gain (losses) on debt securities, net of income taxes. Prior
to December 31, 1993 all debt securities were carried at amortized cost.
Effective December 31, 1993, the Company adopted FASB Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," and
classified investments as held to maturity or available for sale.
Investment securities held to maturity are those for which the Company has
the ability and intent to hold to maturity. Securities meeting such
criteria at the date of purchase and as of the balance sheet date are
carried at cost, adjusted for amortization of premiums and discounts.
Gains and losses on sales of investment securities are based upon the
adjusted book value of the specific securities sold.
Debt securities available for sale are accounted for at fair value and the
unrealized holding gains or losses are presented as a separate component
of stockholders' equity, net of their deferred income tax effect. The
unrealized holding gains net of deferred income taxes, of the debt
securities available for sale as of December 31, 1994, is presented as an
adjustment of the separate component of stockholders' equity. At
March 31, 1995, due to the change in government interest rates, the gross
unrealized loss decreased to $2,326,000 from $4,119,000 at December 31,
1994. After the adjustment for deferred income taxes, the net effect on
stockholders' equity was a $1,129,000 increase. The change in interest
rates is represented by an example of a U.S. Government bond with a two-
year maturity and a yield of 7.55% in December, 1994 and at the end of
March the yield available was 6.65%.
The total stockholders' equity of Hills Bancorporation before the
reduction for the ESOP shares as a percent of total assets is 9.60%.
Under risk-based capital rules, total capital is 00.00% of risk-adjusted
assets, compared to the current 8% requirement.
The consolidated net income for the three months ended March 31, 1995 was
$1,217,000 compared to $1,171,000 for the same period ended March 31,
1994. This is an increase of $46,000 representing an earnings per share
for the three months of $2.48 compared to $2.40 for the same three months
in 1994. Net interest income is up by $327,000 over the prior three
months one year ago and is reflective primarily of volume increases in
terms of total number of assets while the interest rate margin, which is
the difference between what the bank earns on investments and loans and
pays on interest-bearing deposits is up slightly from one year ago. Total
average earning assets were up over $25.7 million for the first quarter of
1995 compared to the same period in 1994. The provisions for loan losses
are the same for both quarters presented and is reflective of management's
overall opinion of the loan portfolio at this time, the growth of the loan
portfolio, and the level of the reserve as of March 31, 1995.
Other income of the bank was $793,000 compared to $934,000 for the three
months ended March 31, 1995 and 1994, respectively. Loan origination fees
amounted to $19,000 for the three month period ended March 31, 1995 and
$174,000 for the three months ended March 31, 1994. As already discussed,
due to raising interest rates, loan origination fees are not expected to
continue at the prior year's pace and the Bank will see a drop for the
year in loan origination fees. The Trust Department fees were $373,000
and $349,000 for the three months ending March 31, 1995 and 1994,
respectively and represents primarily an increase in accounts under
management.
<PAGE>
Other expenses have increased from $2,599,000 for the three months ended
March 31, 1994 to $2,710,000 for the period ended March 31, 1995. Of this
increase of $111,000, $11,000 is from increases in F.D.I.C. insurance and
salary and employee benefits have increased compared to one year ago by
$41,000. This is a combination of salary increases and the number of
full-time equivalent employees increasing from March 31, 1994 to March 31,
1995 by ten employees. Occupancy and furniture and equipment expenses are
up $34,000 for the three months ending March 31, 1995 compared to one year
ago. This increase is primarily in property taxes, rent, and repairs and
maintenance on buildings. Federal and state income taxes for 1995 are
more than in 1994, primarily the result of increased income before taxes.
The Bank's principal sources of funds continues to be prepayment of loan
principal and current amortized loan payments. In addition, funds are
provided from current operations. All of the funds are used to fulfill
loan commitments, make short-term investments, and fund any deposit
withdrawals needed. The Company has no material commitments or plans
which will affect its liquidity or capital resources. The acquisition of
property and equipment may be in cash purchases, or they may be financed
if favorable terms are available.
<PAGE>
HILLS BANCORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings.
Item 2. Changes in Securities
There were no changes in securities.
Item 3. Defaults upon Senior Securities
Hills Bancorporation has no senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
There have been no matters submitted to a vote of security holders
during the quarter ended March 31, 1995.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
See exhibit II - Statement Re Computation of Earnings Per
Common Share
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
ended March 31, 1995.
<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 and thereunto duly authorized.
HILLS BANCORPORATION
(Registrant)
/s/ Dwight O. Seegmiller
Date 05/09/95 Dwight O. Seegmiller, President
(Duly authorized officer of the
registrant)
/s/ James G. Pratt
James G. Pratt, Treasurer
(Principal Financial Officer)
HILLS BANCORPORATION
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
Three Months Ended
March 31,
1995 1994
Shares of common stock, beginning 487,773 487,622
Shares issued during this period - - - -
Shares of common stock, ending 487,773 487,622
Weighted average number of shares 490,799 488,691
outstanding #
Earnings and Earnings per share:
Net income (in thousands) $ 1,217 $ 1,171
Earnings per common share $ 2.48 $ 2.40
# Computation of weighted average number of shares include equivalent
shares attributable to stock options granted in 1993, computed under the
treasury stock method.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 9,804
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 788
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 91,977
<INVESTMENTS-CARRYING> 19,459
<INVESTMENTS-MARKET> 19,450
<LOANS> 313,700
<ALLOWANCE> 6,496
<TOTAL-ASSETS> 444,890
<DEPOSITS> 364,789
<SHORT-TERM> 8,541
<LIABILITIES-OTHER> 3,067
<LONG-TERM> 31,023
<COMMON> 8,919
0
0
<OTHER-SE> 28,555
<TOTAL-LIABILITIES-AND-EQUITY> 444,890
<INTEREST-LOAN> 6,411
<INTEREST-INVEST> 1,455
<INTEREST-OTHER> 40
<INTEREST-TOTAL> 7,906
<INTEREST-DEPOSIT> 3,669
<INTEREST-EXPENSE> 4,127
<INTEREST-INCOME-NET> 3,779
<LOAN-LOSSES> 180
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,710
<INCOME-PRETAX> 1,682
<INCOME-PRE-EXTRAORDINARY> 1,682
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,217
<EPS-PRIMARY> 2.48
<EPS-DILUTED> 2.48
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
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