UNITED STATES
SECURITY AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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: 0-24036
Horizon Financial Services Corporation
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
42-1419757
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(I.R.S. Employer Identification No.)
301 First Avenue East, Oskaloosa, Iowa 52577
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(Address of principal executive offices) (Zip Code)
(641) 673-8328
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(Registrant's telephone number, including area code)
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(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 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock 843,762
------------ ---------------------
Class Shares Outstanding
as of November 14, 2000
Transitional Small Business Disclosure Format (check one):
Yes [ ]: No [ X ]
<PAGE>
HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
----
Item 1. Financial Statements (Unaudited)
<S> <C> <C>
Consolidated Balance Sheets at September 30, 2000 and June 30, 2000. 1
Consolidated Statements of Operations for the three months ended 2
September 30, 2000 and 1999.
Consolidated Statements of Comprehensive Income for the three months 3
ended September 30, 2000 and 1999.
Consolidated Statements of Cash Flows for the three months ended 4
September 30, 2000 and 1999.
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and 7
Results of Operations
Part II. Other Information 12
Signatures 13
Index of Exhibits 14
Financial Data Schedule 15
</TABLE>
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
Assets 2000 2000
------ ---------------- --------------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 2,585,308 $ 1,981,511
Securities available-for-sale 15,638,937 15,670,119
Loans receivable, net 65,375,550 62,417,395
Real estate 247,720 248,951
Stock in Federal Home Loan Bank, at cost 702,500 702,500
Office property and equipment, net 1,307,460 1,049,821
Accrued interest receivable 693,936 602,765
Deferred tax asset 290,700 380,300
Prepaid expenses and other assets 80,277 130,718
------------- -------------
Total assets $ 86,922,388 $ 83,184,080
============= =============
Liabilities and Stockholders' Equity
------------------------------------
Deposits $ 67,380,791 $ 64,761,224
Advances from Federal Home Loan Bank 9,990,360 9,014,199
Advance payments by borrowers for taxes and insurance 45,447 410,555
Accrued income taxes 247,450 201,950
Accrued expenses and other liabilities 843,674 530,145
------------- -------------
Total liabilities 78,507,722 74,918,073
------------- -------------
Stockholders' equity
--------------------
Preferred stock, $.01 par value, authorized 250,000
shares, none issued --- ---
Common stock, $.01 par value, 1,500,000 shares
authorized, issued and outstanding 1,046,198 shares 10,462 10,462
Additional paid-in capital 5,022,511 5,020,361
Retained earnings, substantially restricted 5,261,829 5,135,636
Treasury stock, at cost (200,936 and 183,236 shares at
September and June 2000, respectively) (1,450,436) (1,314,197)
Unearned employee stock ownership plan shares - - - (5,593)
Accumulated other comprehensive income (loss) - net
loss unrealized on securities available for sale (429,700) (580,662)
------------- -------------
Total stockholders' equity 8,414,666 8,266,007
------------- -------------
Total liabilities and stockholders' equity $ 86,922,388 $ 83,184,080
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
-1-
<PAGE>
HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months
Ended September 30
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Interest income:
Loans $ 1,357,163 $ 1,179,980
Investment securities available-for-sale 257,139 272,065
Other investment income 17,873 96,606
----------- -----------
Total interest income 1,632,175 1,548,651
----------- -----------
Interest expense:
Deposits 807,016 647,095
Advance from Federal Home Loan Bank 139,580 215,023
----------- -----------
Total interest expense 946,596 862,118
----------- -----------
Net interest income 685,579 686,533
Provision for losses on loans 24,000 24,000
----------- -----------
Net interest income after provision for losses on loans 661,579 662,533
----------- -----------
Noninterest income:
Fees, commissions and service charges 153,780 118,624
Loss on sale of securities, net (36,350) (233,306)
Other - - - - - -
----------- -----------
Total noninterest income 117,430 (114,682)
----------- -----------
Noninterest expense:
Compensation, payroll taxes and employee benefits 298,568 289,648
Advertising 14,401 27,778
Office property and equipment 84,785 79,406
Federal insurance premiums and special assessments 7,893 12,629
Data processing services 42,715 38,876
Other real estate expense, net 2,446 2,559
Other 76,509 87,710
----------- -----------
Total noninterest expense 527,317 538,606
----------- -----------
Earnings before taxes on income 251,692 9,245
Taxes on income 87,500 3,500
----------- -----------
Net earnings $ 164,192 $ 5,745
=========== ===========
Earnings per common share -
Basic $0.19 $0.01
Diluted $0.19 $0.01
</TABLE>
See Notes to Consolidated Financial Statements
-2-
<PAGE>
HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARIES
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
Three Months
Ended September 30
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Net income $ 164,192 $ 5,745
Other Comprehensive Income:
Unrealized gains (losses) on securities available for sale:
Unrealized holding gains (losses) arising
during the period, net of tax 117,936 (116,643)
Less: reclassification adjustment for net losses
included in net income, net of tax 33,026 194,119
--------- ---------
Other comprehensive income, net of tax 150,962 77,476
--------- ---------
Comprehensive income $ 315,154 $ 83,221
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE>
HORIZON FINANCIAL SERVICES CORPORATION and SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
September 30,
2000 1999
------- -------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 164,192 $ 5,745
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation 29,317 30,923
Amortization of fees, premiums and accretion of discounts, net 7 (35,003)
Provision for losses on loans 24,000 24,000
Loans originated for sale (618,425) (735,220)
Proceeds on sales of loans 481,253 723,520
Loss on sale of securities 36,350 233,306
Increase in accrued income taxes payable 45,500 - - -
(Increase) decrease in accrued interest receivable (91,171) 9,788
Amortization of stock compensation plans 5,593 14,898
Other, net 367,351 56,561
----------- -----------
Net cash provided by operating activities 443,967 328,518
----------- -----------
Cash flows from investing activities:
Principal collected on securities available for sale 219,404 425,656
Proceeds from sale of securities available for sale 224,313 3,920,325
Purchase of securities available for sale (208,330) (1,341,349)
Loans to customers, net (2,844,983) (733,783)
Purchase of office property and equipment, net (286,956) (711)
----------- -----------
Net cash (used in) provided by investing activities (2,896,552) 2,270,138
----------- -----------
Cash flows from financing activities:
Increase (decrease) in deposits, net 2,619,567 (719,374)
Decrease advance payments by borrowers for taxes and insurance (365,108) (319,816)
Proceeds from advances from FHLB 1,000,000 - - -
Principal payments on advances from FHLB (23,839) (22,497)
Payment of dividends (37,999) (38,860)
Treasury stock acquired (136,239) - - -
----------- -----------
Net cash provided by (used in) financing activities 3,056,382 (1,100,547)
----------- -----------
Net increase in cash and cash equivalents 603,797 1,498,109
Cash and cash equivalents at beginning of period 1,981,511 7,917,020
----------- -----------
Cash and cash equivalents at end of period $ 2,585,308 $ 9,415,129
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 801,820 $ 770,305
Cash paid for taxes 42,000 - - -
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
-4-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HORIZON FINANCIAL SERVICES CORPORATION
1. BASIS OF PRESENTATION
The consolidated financial statements for the three months ended September 30,
2000 unaudited. In the opinion of management of Horizon Financial Services
Corporation (the "Registrant" or "Company"), these financial statements reflect
all adjustments, consisting only of normal occurring accruals, necessary to
present fairly the consolidated financial position of the Company at September
30, 2000 and its results of operations and statements of cash flows for the
periods presented. These consolidated financial statements do not purport to
contain all the necessary disclosures required by generally accepted accounting
principles that might otherwise be necessary in the circumstances and should be
read in conjunction with the consolidated financial statements and notes therein
included in the annual report of Horizon Financial Services Corporation for the
year ended June 30, 2000. The results of the periods presented are not
necessarily representative of the results of operations and cash flows which may
be expected for the entire year.
2. ORGANIZATION
The Company was organized as a Delaware corporation at the direction of Horizon
Federal Savings Bank (the "Bank") for the purpose of becoming a savings bank
holding company, as part of the conversion from a mutual to a stock institution.
The conversion was completed on June 28, 1994 with the sale of 506,017 shares of
the Company's common stock at a price of $10 per share.
3. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, the Bank and the Bank's wholly owned subsidiary,
Horizon Investment Services, Inc. The principal business activity of Horizon
Investment Services, Inc. is to sell credit life insurance to customers of the
Bank. All material intercompany accounts and transactions have been eliminated.
-5-
<PAGE>
4. EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standard No. 128
"Earnings Per Share". The following provides a reconciliation of the amounts
used in the determination of basic and diluted earnings per share for the three
month periods ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended
September 30
2000 1999
---- ----
<S> <C> <C>
Net earnings $ 164,192 $ 5,745
========= =========
Basic earnings per share:
Weighted average shares outstanding 852,111 875,062
Less unearned employee stock ownership plan shares (945) (11,470)
--------- ---------
Weighted average number of common shares outstanding 851,166 863,592
========= =========
Earnings per common share - basic $ 0.19 $ 0.01
========= =========
Diluted earnings per share:
Weighted average shares outstanding 852,111 875,062
Less unearned employee stock ownership plan shares (945) (11,470)
Assumed incremental option shares
using the treasury stock method 9,571 13,916
--------- ---------
Common and common equivalent shares outstanding 860,737 877,508
========= =========
Earnings per common share - diluted $ 0.19 $ 0.01
========= =========
</TABLE>
-6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Horizon Financial Services Corporation ("the Company") is a savings bank holding
company, the primary asset of which is Horizon Federal Savings Bank, ("the
Bank"). The Company was incorporated in March 1994 and sold 506,017 shares of
common stock on June 28, 1994 for the purpose of acquiring all of the capital
stock of the Bank in connection with the Bank's conversion from mutual to stock
form of ownership (the "Conversion").
The principal business of the Company (through its operating subsidiary, the
Bank), has historically consisted of attracting deposits from the general public
and making loans secured by residential and, to a lesser extent, other
properties. The Company's results of operations are primarily dependent on the
difference or spread ("interest rate spread") between the average yield on
loans, mortgage-backed and related securities and investments and the average
rate paid on deposits and other borrowings as well as the relative amounts of
such assets and liabilities. The interest rate spread is affected by regulatory,
economic and competitive factors that influence interest rates, loan demand and
deposit flows. The Company, like other non-diversified savings institution
holding companies, is subject to interest rate risk to the degree that its
interest-earning assets mature or reprice at different times, or on a different
basis, than its interest-bearing liabilities.
The Company's results of operations are also affected by, among other things,
fee income received, loss or profit on securities available for sale, the
establishment of provisions for possible loan losses, income derived from
subsidiary activities, the level of operating expenses and income taxes. The
Company's operating expenses principally consist of employee compensation and
benefits, occupancy expenses, federal deposit insurance premiums, data
processing expenses and other general and administrative expenses.
The Company is significantly affected by prevailing economic conditions
including federal monetary and fiscal policies and federal regulation of
financial institutions. Deposit balances are influenced by a number of factors
including interest rates paid on competing personal investments and the level of
personal income and savings within the institution's market area. Lending
activities are influenced by the demand for housing as well as competition from
other lending institutions. The primary sources of funds for lending activities
include deposits, loan payments, borrowings and funds provided from operations.
Local economic conditions in the Bank's market are stable. As a result of an
over-supply of grain, farm prices for grain, which are currently depressed, may
continue to remain depressed and drop further. In the event current economic and
market conditions persist or worsen, loan demand and existing loans may be
affected. No assurances can be given that the Bank will be able to maintain or
increase its loan portfolio, which could adversely affect the financial
condition and results of operations of the Company and the Bank.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
The Company, and its subsidiaries may from time to time make written or oral
"forward-looking statements", including statements contained in the Company's
filings with the Securities and Exchange Commission (including this Quarterly
Report on Form 10-QSB and the exhibits hereto and thereto), in its reports to
stockholders and in other communications by the Company, which are made in good
faith by the Company and the Bank pursuant to the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995.
-7-
<PAGE>
These forward-looking statements include statements with respect to the
Company's and the Bank's beliefs, plans, objectives, goals, expectations,
anticipations, estimates and intentions, that are subject to significant risks
and uncertainties, and are subject to change based on various factors (some of
which are beyond the Company's and the Bank's control). The words "may",
"could", "should", "would", "believe", "anticipate", "estimate", "expect",
"intend", "plan" and similar expressions are intended to identify
forward-looking statements. The following factors, among others, could cause the
Company's and the Bank's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in such
forward-looking statements:
o the strength of the United States economy in general and the strength
of the local economies in which the Company and the Bank conduct their
operations;
o the effects of, and changes in, trade, monetary and fiscal policies and
laws, including interest rate policies of the Federal Reserve Board,
inflation, interest rate, market and monetary fluctuations;
o the timely development of and acceptance of new products and services
of the Bank and the perceived overall value of these products and
services by users, including the features, pricing and quality compared
to competitors' products and services;
o the willingness of users to substitute competitors' products and
services for the Bank's products and services;
o the success of the Bank in gaining regulatory approval of its products
and services, when required;
o the impact of changes in financial services' laws and regulations
(including laws concerning taxes, banking, securities and insurance);
o technological changes;
o acquisitions;
o changes in consumer spending and saving habits;
o and the success of the Company and the Bank at managing the risks
involved in the foregoing.
The foregoing list of important factors is not exclusive. Additional discussion
of factors affecting the Company's business is contained in the Company's
periodic filings with the Securities and Exchange Commission. The Company does
not undertake and expressly disclaims any intent or obligation, to update any
forward-looking statements, whether written or oral, that may be made from time
to time by or on behalf of the Company or the Bank.
FINANCIAL CONDITION
The Company's total assets at September 30, 2000 of $86.9 million increased $3.7
million, or 4.49%, from $83.2 million at June 30, 2000. This increase was
attributed to the loans receivable increase of $2.9 million, or a 4.74% increase
over June 30, 2000 and a cash and cash equivalents increase of $604,000.
Additional growth in total assets is attributed to the increase in office
property and equipment of $258,000. The Company completed an extensive remodel
of its Knoxville, Iowa branch office this quarter. The expansion will generate
better office efficiency and provide additional customer parking.
Total liabilities increased $3.6 million, or 4.79%, to $78.5 million at
September 30, 2000 from $74.9 million at June 30, 2000. This is a result of a
$2.6 million increase in deposits, and a $976,000 increase in advances from the
Federal Home Loan Bank which was used to fund the Bank's increased loan demand
and maintain required liquidity. There were no other significant changes in the
components of the Company's balance sheet.
-8-
<PAGE>
RESULTS OF OPERATIONS
The Company's results of operations depend primarily on the level of its net
interest income and non- interest income and the level of its operating
expenses. Net interest income depends upon the volume of interest-earning assets
and interest-bearing liabilities and interest rates earned or paid on such
assets or liabilities, respectively. The Company's non-interest income consists
primarily of fees charged on transaction accounts which help to offset the costs
associated with establishing and maintaining these accounts.
Comparison of three month periods ended September 30, 2000 and September 30,
1999.
GENERAL
Net earnings increased $158,000 to $164,000 for the three month period ended
September 30, 2000 from $6,000 for the three month period ended September 30,
1999. This increase was primarily attributable to a decrease in losses on sales
of securities from $233,000 for the three month period ended September 30, 1999
to $36,000 for the three month period ended September 30, 2000.
INTEREST INCOME
Interest income increased $83,000 to $1,632,000 for the three month period ended
September 30, 2000 compared to $1,549,000 for the three month period ended
September 30, 1999. The increase was the result of a 24 basis point increase in
the weighted average yield on average interest-earning assets to 7.98% for the
three month period ended September 30, 2000 as compared to 7.74% for the same
period in 1999 and an increase in the average outstanding balances of
interest-earning assets from $80.0 million for the three month period ended
September 30, 1999 to $81.8 million for the same period ended September 30,
2000.
INTEREST EXPENSE
Interest expense increased $85,000 to $946,000 for the three month period ended
September 30, 2000 compared to $862,000 for the three month period ended
September 30, 1999. The increase in interest expense was primarily due to the
weighted average yield on interest-bearing liabilities increasing by 47 basis
points to 5.02% for the three month period ended September 30, 2000 as compared
to 4.55% for the same period in 1999. The average outstanding balance of average
interest-bearing liabilities decreased $467,000 from $75.8 million for the three
month period ended September 30, 1999 to $75.4 million for the same period ended
September 30, 2000.
NET INTEREST INCOME
Net interest income decreased $1,000 from $687,000 for the three month period
ended September 30, 1999 to $686,000 for the three month period ended September
30, 2000. The Company's net interest margin decreased 24 basis points to 2.96%
for the three month period ended September 30, 2000 as compared to 3.20% for the
same period in 1999. The ratio of the Company's average interest-earning assets
to average interest-bearing liabilities increased 3.03% from 105.47% for the
three month period ended September 30, 1999 to 108.50% for the three month
period ended September 30, 2000.
-9-
<PAGE>
PROVISION FOR LOSSES ON LOANS
The provision for losses on loans is a result of management's periodic analysis
of the adequacy of the Company's allowance for losses on loans. The Company
recorded a provision for losses on loans of $24,000 for the three month periods
ended September 30, 2000 and 1999. As of September 30, 2000, the Company's
non-performing assets, consisting of nonaccrual loans, accruing loans 90 days or
more delinquent, real estate owned and repossessed consumer property, totaled
$1,164,000 or 1.34% of total assets, compared to $1,155,000 or 1.39% of total
assets as of June 30, 2000. As of September 30, 2000, the Company's allowance
for losses on loans was $390,000, representing 33.5% of non-performing assets
and .60% of net loans receivable.
The Company continues to monitor and adjust its allowance for losses on loans as
management's analysis of its loan portfolio and economic conditions dictate. The
Company believes it has taken an appropriate approach to maintain the allowance
for loan losses at a level consistent with the Company's loss experiences and
considering, among other factors, the composition of the Company's loan
portfolio, the level of the Company's classified and non-performing assets and
their estimated value. Future additions to the Company's allowance for losses on
loans and any change in the related ratio of the allowance for losses on loans
to non-performing loans are dependent upon the economy, changes in real estate
values and interest rates. In addition, federal regulators may require
additional reserves as a result of their examination of the Company. The
allowance for losses on loans reflects what the Company currently believes is an
adequate level of reserves, although there can be no assurance that future
losses will not exceed the estimated amounts, thereby adversely affecting future
results of operations.
NONINTEREST INCOME
Noninterest income increased $232,000 to $117,000 for the three months ended
September 30, 2000 from (115,000) for the same period ended September 30, 1999.
The increase was primarily attributable to a $233,000 loss recognized on the
sale of securities for the three month period ended September 30, 1999 as
compared to a $36,000 loss recognized on the sale of securities for the same
period ended September 30, 2000. Fees, commissions, and service charges
increased $35,000 for the period ending September 30, 2000 as compared to the
same period ended September 30, 1999 due to increased service charges on
checking accounts and commission income on sales of alternative financial
products sold through the wholly-owned financial services subsidiary of the
Bank.
NONINTEREST EXPENSE
Total noninterest expense decreased $12,000 from $539,000 for the three months
ended September 30, 1999 to $527,000 for the three month period ended September
30, 2000. The decrease was primarily attributable to a decrease of $14,0000 in
advertising expense from $28,000 for the three month period ended September 30,
1999 to $14,000 for the same period ended September 30, 2000 and a decrease of
$11,000 in other expense due to decreased legal fees. Compensation and employee
benefits expenses, the largest component of noninterest expense, increased
$9,000 for the three months ended September 30, 2000 as compared to the same
period in 1999.
-10-
<PAGE>
TAXES ON INCOME
The Company had a $84,000 increase in taxes on income for the three month period
ended September 30, 2000 as a result of increased net earnings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are deposits and principal and interest
payments collected on mortgage loans, investments and related securities. While
scheduled loan repayments and maturing investments are relatively predictable,
deposit flows and early loan prepayments are more influenced by interest rates,
general economic conditions and competition. Additionally, the Company may
borrow funds from the Federal Home Loan Bank ("FHLB") of Des Moines or utilize
other borrowings of funds based on need, comparative costs and availability at
the time.
The Office of Thrift Supervision (the "OTS") requires minimum levels of liquid
assets. OTS regulations presently require the Bank to maintain an average daily
balance of liquid assets (United States Treasury and federal agency securities
and other investments having maturities of five years of less) equal to at least
4.0% of the sum of its average daily balance of net withdrawable deposit
accounts and borrowings payable in one year or less. Such requirements may be
changed from time to time by the OTS to reflect changing economic conditions.
Such investments are intended to provide a source of relatively liquid funds
upon which the Bank may rely, if necessary, to fund deposit withdrawals and
other short-term funding needs. The Bank has historically maintained its
liquidity ratio in excess of that requirement. The Bank's liquidity ratio was
5.00% on September 30, 2000 and 5.38% on June 30, 2000.
At September 30, 2000, the Company had advances of $10.0 million from the FHLB
of Des Moines outstanding. The Company uses its liquidity resources principally
to meet ongoing commitments, to fund maturing certificates of deposit and
deposit withdrawals, and to meet operating expenses. The Company anticipates
that it will have sufficient funds available to meet current loan commitments.
At September 30, 2000, the Company had outstanding commitments to extend credit
which amounted to $2,769,000 (including $904,000 in available revolving
commercial lines of credit). At September 30, 2000, certificates of deposit
scheduled to mature in one year or less totaled $23.4 million. Management
believes, based on its experience to date, that a significant portion of these
funds will remain with the Company. Management believes that loan repayments and
other sources of funds will be adequate to meet the Company's foreseeable
liquidity needs.
Liquidity management is both a daily and long-term responsibility of management.
The Bank adjusts its investments in liquid assets based upon management's
assessment of (i) expected loan demand, (ii) expected deposit flows, (iii)
yields available on interest-bearing investments and (iv) the objectives of its
asset/liability management program. Excess liquidity generally is invested in
interest-earning overnight deposits and other short-term government and agency
obligations.
At September 30, 2000, the Bank had tangible and core capital of $6.2 million,
or 7.3% of adjusted total assets, which was approximately $5.0 million and $2.8
million above the minimum requirements of 1.5% and 4.0%, respectively, of the
adjusted total assets in effect on that date. At September 30, 2000, the Bank
had risk-based capital of $6.6 million (including $6.2 million in core capital),
or 12.5% of risk- weighted assets of $52.9 million. This amount was $2.4 million
above the 8.0% requirement in effect on that date.
-11-
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
None
ITEM 2. Changes in Securities
---------------------
None
ITEM 3. Defaults Upon Senior Securities
-------------------------------
None
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
ITEM 5. Other Information
-----------------
None
ITEM 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits:
See Index to Exhibits
(b) The following is a description of the Form 8-K filed during
the three months ended September 30, 2000:
On September 6, 2000, a current report on Form 8-K was
filed to announce the Company's earnings for the quarter
and fiscal year ended June 30, 2000.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirement 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 FINANCIAL SERVICES CORPORATION
Registrant
Date: November 14,2000 /s/ Robert W. DeCook
------------------ ------------------------------------------
Robert W. DeCook
President and Chief Executive Officer
Date: November 14, 2000 /s/ Sharon McCrea
-------------------- ------------------------------------------
Sharon McCrea
Vice President and Chief Financial Officer
-13-
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Document
------ ----------------------------------------------------------------------
3 The Articles of Incorporation and Bylaws, filed on March 18, 1994 as
exhibits 3.1 and 3.2, respectively, to Registrants Registration
Statement on Form S-1 (File No. 33-76674), are incorporated herein by
reference.
4 Registrant's Specimen Stock Certificate, filed on March 18, 1994 as
Exhibit to Registrant's Registration Statement on Form S-1 (File No.
33-76674), is incorporated herein by reference.
10.1 Employment Agreements between the Bank and Messrs. DeCook and
Gillespie, filed as Exhibits 10.1 and 10.2, respectively, to
Registrant's Report on Form 10- KSB for the fiscal year ended June
30, 1994 (File No. 0-24036), are incorporated herein by reference.
10.2 1994 Stock Option and Incentive Plan, filed as Exhibit 10.3 in
Registrant's Report on Form 10-KSB for the fiscal year ended June 30,
1994 (File No. 0-24036), is incorporated herein by reference.
10.3 Recognition and Retention Plan, filed as Exhibit 10.4 to Registrant's
Report on Form 10-KSB for the fiscal year ended June 30, 1994 (File
No. 0-24036), is incorporated herein by reference.
11 Statement re computation of earnings per share (See Footnote 4 of the
Registrant's Notes to Consolidated Financial Statements contained
herein)
27 Financial Data Schedule (electronic filing only)
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