-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N/yB/CHmdNK2DwYt6bl5XmOL0B1DiTU2u1i1C81pTmExPJoHBClHL5p1ltAyKuUk UPmhC1+8T/swpuwZM7TM5Q== 0000743530-97-000069.txt : 19970814 0000743530-97-000069.hdr.sgml : 19970814 ACCESSION NUMBER: 0000743530-97-000069 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILLS BANCORPORATION CENTRAL INDEX KEY: 0000732417 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 421208067 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12668 FILM NUMBER: 97659555 BUSINESS ADDRESS: STREET 1: 131 MAIN ST CITY: HILLS STATE: IA ZIP: 52235 BUSINESS PHONE: 3196792291 MAIL ADDRESS: STREET 1: 131 MAIN ST CITY: HILLS STATE: IA ZIP: 52235 10-Q 1 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 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 Commission file number: 0-12668 Hills Bancorporation Incorporated in Iowa I.R.S. Employer Identification ------------------------------ No. 42-1208067 131 MAIN STREET, HILLS, IOWA Telephone number: (319) 679-2291 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 JULY 31, 1997 - -------------------------- ------------------ Common Stock, no par value 1,467,259 HILLS BANCORPORATION Index to Form 10-Q Part I FINANCIAL INFORMATION Page Number ------ Item 1. Financial Statements Consolidated balance sheets, June 30, 1997 (unaudited) and December 31, 1996 Consolidated statements of income, (unaudited) for three and six months ended June 30, 1997 and 1996 Consolidated statement of stockholders' equity, (unaudited) for three and six months ended June 30, 1997 and 1996 Consolidated statements of cash flows (unaudited) for three and six months ended June 30, 1997 and 1996 Notes 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 HILLS BANCORPORATION CONSOLIDATED BALANCE SHEETS (In Thousands) June 30, 1997 December 31, Unaudited 1996* --------- ------------ ASSETS Cash and due from banks .................................. $ 17,807 $ 15,036 Investment securities: Available for sale (amortized cost June 30, 1997 $109,865; December 31, 1996 $109,495) ......................... 109,995 110,537 Held to maturity (fair value June 30, 1997 $24,271; December 31, 1996 $22,232) .......................... 24,063 22,098 Federal funds sold ....................................... 1,712 1,107 Loans, net ............................................... 399,856 368,264 Property and equipment, net .............................. 8,349 8,409 Accrued interest receivable .............................. 5,396 4,884 Deferred income taxes, net ............................... 1,668 1,359 Other assets ............................................. 7,924 7,758 -------- -------- $576,770 $539,452 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Noninterest-bearing deposits ............................. $ 51,947 $ 46,154 Interest-bearing deposits ................................ 413,697 403,907 -------- -------- Total deposits ........................................ $465,644 $450,061 Federal funds purchased and securities sold under agreements to repurchase ................... 6,084 6,071 Federal Home Loan Bank notes ............................. 45,795 25,795 Accrued interest payable ................................. 1,917 1,952 Other liabilities ........................................ 2,120 1,822 -------- -------- $521,560 $485,701 -------- -------- REDEEMABLE COMMON STOCK HELD BY EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) ................................................ $ 6,897 $ 6,416 -------- -------- STOCKHOLDERS' EQUITY Capital stock, common, no par value; authorized 10,000,000 shares; issued June 30, 1997- 1,467,259 shares; issued December 31, 1996 - 1,465,384 shares ...................................... $ 9,042 $ 8,997 Retained earnings ........................................ 46,086 44,078 Unrealized gains (losses) on investment securities, net .. 82 676 -------- -------- $ 55,210 $ 53,751 Less, maximum cash obligation related to ESOP shares ........................................... 6,897 6,416 -------- -------- $ 48,313 $ 47,335 -------- -------- $576,770 $539,452 ======== ========
* Derived from audited financial statements. See Notes to Financial Statements. HILLS BANCORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF INCOME Three and Six Months Ended June 30, 1997 and 1996 (In Thousands, Except Per Share Data) Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 1997 1996 1997 1996 -------------------- -------------------- Interest Income: Interest and fees on loans .................... $ 8,515 $ 7,123 $ 16,556 $ 14,122 Interest on investment securities Taxable .............................. 1,693 1,478 3,366 2,896 Non-taxable ......................... 298 269 592 546 Other interest income ......................... 39 133 80 301 -------------------------------------------- Total interest income ......................... 10,545 9,003 20,594 17,865 -------------------------------------------- Interest Expense: Interest on deposits .......................... 4,719 4,253 9,322 8,496 Interest on securities sold under agreements to repurchase ................... 109 67 198 167 Interest on FHLB notes......................... 730 488 1,260 977 -------------------------------------------- Total interest expense ........................ 5,558 4,808 10,780 9,640 -------------------------------------------- Net interest income ........................... 4,987 4,195 9,814 8,225 Provision for loan losses .............................. 395 180 590 360 -------------------------------------------- Net interest income after provision for loan losses ............................. 4,592 4,015 9,224 7,865 -------------------------------------------- Other income: Gain on disposition of marketable equity security ................................... 1,054 -- 1,054 -- Real estate origination fees .................. 61 94 120 205 Trust fees .................................... 321 223 625 408 Deposit account charges and fees .............. 470 397 903 772 Other fees and charges ........................ 300 246 629 527 -------------------------------------------- Other expenses: Salaries and employee benefits ................ 1,797 1,513 3,587 3,063 Occupancy expenses ............................ 241 207 487 419 Furniture and equipment ....................... 343 254 670 520 Contributions ................................. 1,073 1 1,092 18 Office supplies and postage ................... 187 186 418 362 Other operating ............................... 867 618 1,714 1,204 -------------------------------------------- 4,508 2,779 7,968 5,586 -------------------------------------------- Income before income taxes .................... 2,290 2,196 4,587 4,191 Federal and state income taxes ......................... 355 641 1,041 1,210 -------------------------------------------- Net income .................................... $ 1,935 $ 1,555 $ 3,546 $ 2,981 ============================================ Per common share: Net income ........................... 1.31 1.05 2.40 2.02 Dividend, January ........... -- -- 1.05 .95 Weighted average of common outstanding stock ......... 1,480,933 1,474,199 1,480,199 1,476,216
See Notes to Financial Statements HILLS BANCORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Six Months Ended June 30, 1997 and 1996 (In Thousands) Capital Retained Unrealized ESOP Total Stock Earnings Losses Obligations ---------------------------------------------------- Balance, January 1, 1997 ........ $ 47,335 $ 8,996 $ 44,079 $ 676 $ (6,416) Exercise stock options for 2,055 shares ........................ 53 53 - - - - - - - - - Redemption of stock ............. (7) (7) - - - - - - - - - Net income ...................... 3,546 - - - 3,546 - - - - - - Change related to ESOP shares ... (481) - - - - - - - - - (481) Cash dividends ($1.05 per share) (1,539) - - - (1,539) - - - - - - Unrealized gains (losses) on debt securities, net .......... (594) - - - - - - (594) - - - -------------------------------------------------- Balance, June 30, 1997 .......... $ 48,313 $ 9,042 $ 46,086 $ 82 $ (6,897) ================================================== Balance, January 1, 1996 ........ $ 43,277 $ 8,925 $ 39,325 $ 298 $ (5,271) Net income ...................... 2,981 - - - 2,981 - - - - - - Change related to ESOP shares ... (531) - - - - - - - - - (531) Cash dividends ($.95 per share) . (1,391) - - - (1,391) - - - - - - Unrealized gains (losses) on debt securities, net ............... (816) - - - - - - (816) - - - -------------------------------------------------- Balance, June 30, 1996 .......... $ 43,520 $ 8,925 $ 40,915 $ (518) $ (5,802) ==================================================
See Notes to Financial Statements. HILLS BANCORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 1997 and 1996 (In Thousands) 1997 1996 -------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income ..................................................................... $ 3,546 $ 2,981 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation ............................................................... 535 412 Provision for loan losses ...................................................... 590 360 Gain on disposition of marketable equity security ......................... (1,054) - - - (Increase) decrease in accrued interest receivable.......................... (512) (22) Amortization of bond discount .............................................. 189 266 (Increase) in other assets ................................................. (337) (37) Amortization of intangibles ................................................ 171 - - - Increase in accrued interest and other liabilities ......................... 263 150 -------------------- Net cash provided by operating activities .................................. $ 3,391 $ 4,110 -------------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturities of investment securities: Available for sale ......................................................... $ 9,855 $ 6,000 Held to maturity ........................................................... 1,393 2,852 Purchase of investment securities Available for sale ......................................................... (9,315) (12,321) Held to maturity ........................................................... (3,393) (2,474) Federal funds sold, net ........................................................ (605) 6,118 Loans made to customers, net of collections .................................... (32,182) (9,495) Purchases of property and equipment ............................................ (475) (361) -------------------- Net cash (used in) investing activities .................................... $(34,722) $ (9,681) -------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in deposits ........................................ $ 15,583 $ 10,301 Net increase (decrease) in fed funds purchased and securities sold under agreements to repurchase .......................... 13 (4,953) Borrowings from FHLB ....................................................... 20,000 - - - Stock options exercised .................................................... 52 Redemption of common stock ................................................. (7) - - - Dividends paid ............................................................. (1,539) (1,391) -------------------- Net cash provided by financing activities ............................... $ 34,102 $ 3,957 -------------------- Increase in cash and due from banks ..................................... $ 2,771 $ (1,614) CASH AND DUE FROM BANKS Beginning .................................................................. $ 15,036 11,883 -------------------- Ending ..................................................................... $ 17,807 $ 10,269 ==================== SUPPLEMENTAL DISCLOSURES Cash payments for: Interest paid to depositors and others .................................. $ 9,325 $ 8,555 Interest paid on other obligations ...................................... 1,458 1,144 Non-cash financing transactions: Increase in maximum cash obligation related to ESOP shares ......................................................... 481 531 Net unrealized gains (losses) on debt securities ........................ (913) (816)
See Notes to Financial Statements. HILLS BANCORPORATION NOTES 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. Note 2. Loans The following tables set forth the composition of loans and the allowance for loan losses: (In thousands) June 30 ------------------------- 1997 1996 ------------------------- Agricultural ................................. $ 24,630 $ 18,983 Commercial and financial ..................... 31,101 26,501 Real estate, construction .................... 11,530 8,707 Real estate, mortgage ........................ 306,149 248,745 Loans to individual .......................... 34,232 31,641 ------------------------- $407,642 $334,577 Less allowance for loan losses ............... 7,786 6,896 ------------------------- $399,856 $327,681 ========================= Transactions in the allowance for loan losses are as follows: (In thousands) Six months ended June 30 ------------------------- 1997 1996 ------------------------- Balance, beginning ........................... $ 7,311 $ 6,740 Provision charged to expense ............... 590 360 Net charge-offs ............................ (115) (204) ------------------------ Balance, ending .............................. $ 7,786 $ 6,896 ======================== The following summarizes the Company's nonaccrual, past due, restructured and impaired loans: (In thousands) June 30 1997 1996 ------------------ Nonaccrual .................................... $- - - $ 339 Accruing loans, past due 90 days or more ...... 870 777 Restructured loan ............................. - - - - - - Impaired loans ................................ 6,807 5,820 Note 3. Changes in Accounting Policies Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", was issued in February 1997 and will be effective for the Company for periods ending after December 15, 1997 and may not be adopted prior to such date. This statement establishes standards for computing and presenting earnings per share. The Company expects to adopt SFAS No. 128 when required and management anticipates adoption of this statement will not have a material effect on earnings per share disclosures. In June 1997, the FASB issued Statement #130, "Reporting Comprehensive Income," and Statement #131, "Disclosures About Segments of an Enterprise and Related Information." Statement #130 establishes standards for reporting comprehensive income in financial statements. Statement #131 expands certain reporting and disclosure requirements for segments from current standards. The Statements are effective for fiscal years beginning after December 15, 1997 and the Company does not expect the adoption of these new standards to result in material changes to previously reported amounts or disclosures PART I, ITEM 2. HILLS BANCORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATION The Hills Bancorporation consolidated balance sheet as of June 30, 1997 reflects total assets of $576.8 million, which is an increase of $37.3 million from December 31, 1996. Net loans are $399.9 million which represents an increase of $31.6 million from December 31, 1996. These loan increases continue to be primarily in the area of single family residential loans and some multi-family housing units. Deposits (when federal funds purchased and securities sold under agreements to repurchase are included) as of June 30, 1997 totaled $471.7 million, an increase of $15.6 million in six months. Borrowings from the FHLB have increased from $25.8 million to $45.8 million during the last six months and these funds were used to fund the new loans. Other significant balance sheet changes from June 30, 1996 to June 30, 1997 were as follows: Investment securities increase $8.1 million to $134.1 million. Net loans at $399.9 million, an increase of $72.2 million. Total deposits, including securities sold under agreements to repurchase, increased from $407.6 million to $471.7 million for a total change of $64.1 million. Borrowings from the Federal Home Loan Bank increased $15 million and these funds were used primarily to fund residential home loans. The addition of a location in Lisbon, Iowa in July of 1996 and Kalona, Iowa in September, 1996 accounted for approximately $40 million of this asset growth; $22 million in loans; $18 million in investment securities and other assets; and approximately $40 million in deposit growth. Significant changes in the balance sheet are subject to asset-liability management, which 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. In January 1997, Hills Bancorporation paid a dividend of $1.05 per share, a 10.52% increase from the $.95 paid in January 1996. Stockholders' equity at June 30, 1997 and December 31, 1996 reflects an adjustment for unrealized gains (losses) on investment securities, net of income taxes. As of December 31, 1996, the unrealized net gains on securities were $676,000 compared to $82,000 at June 30, 1997. The major reduction in stockholders' equity was the result of the disposition of an appreciated equity security to the Hills Bancorporation Foundation. Other details of this transaction is discussed in the income statement comment section. The total stockholders' equity of Hills Bancorporation as of June 30, 1997 (before the reduction for the ESOP shares) as a percent of total assets was 9.57%. Under risk-based capital rules, total capital is 15.10% of risk-adjusted assets, compared to the current 8% requirement. Net income for the quarter ended June 30, 1997 increased $380,000 from the previous year's quarter. Net interest income increased $792,000 and $1,589,000 for the quarter and the six months ended June 30, 1997 compared to the same time period in 1996. These increases are due to significant volume increases in average earnings assets which, as of June 30, 1997 compared to one year ago, had grown approximately $62.9 million. These increases are the results of increased loan volume and the two acquisitions discussed above. Due to the large increase in net loans, an additional $200,000 was provided for the reserve for loan losses for the second quarter of 1997. A significant other transaction in the second quarter of 1997 was the recognition of $1,054,000 on the disposition of a marketable equity security held by Hills Bancorporation. The equity security was contributed to the Hills Bancorporation Foundation, a private charitable foundation, organized exclusively for charitable and educational purposes to benefit the communities with bank offices. As a result of the stock contribution, Hills Bancorporation recognized a gain of $1,054,000; a contribution expense of the same amount, and an income tax savings of approximately $340,000 which is reflected as tax savings in the federal and state income taxes expense for the second quarter. The marketable equity security was purchased several years ago as an investment in a non-marketable start-up software developer. The stock became marketable upon an initial public offering in late 1996. Excluding the gain on disposition of the marketable equity securite, all other income items increased $365,000 for the six months, primarily due to trust fee increases of $217,000, which was the direct result of additional assets under management and deposit amount charges and fees which increased $131,000. Excluding the contribution of the marketable equity security, all other expenses for the six months increased $1,328,000 and the major portion of this increase was a $524,000 increase in salaries and employee benefits as twenty seven full time full-time equivalent positions were added due to the new banks acquired in 1996 and new positions added at Hills Bank in various areas. Other operating expenses were up $510,000 as a result of increases in marketing, other professional fees, and other data processing charges. 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 materially 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. Forward-looking information relating to the financial results or strategies of the Company are referenced throughout Management's Discussion and Analysis. The following paragraphs identify forward-looking statements and the risks that need to be considered when reading those statements. Forward-looking statements include such words as believe, expect, anticipate, target, goal, objective or other words with similar meaning. The Company is under no obligation to update such forward-looking information statements. The risks involved in the operations and strategies of the Company include competition from other financial institutions, changes in interest rates, changes in economic or market conditions and changes in regulations from the federal and state regulators. These risks, whch are not all inclusive, cannot be estimated. 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 not senior securities. Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting held on April 21, 1997, the security holders approved the following: (a) Elected Sheldon E. Yoder, D.V.M., to a one-year term to the Board of Directors expiring at the 1998 Annual Meeting. (b) Elected Willis M. Bywater; Thomas J. Gill, D.D.S.; Donald H. Gringer; and Dwight O. Seegmiller to three-year terms to the Board of Directors expiring at the 2000 Annual Meeting. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibit See exhibit 11 - 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 June 30, 1997. 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) August 13, 1997 /s/ Dwight O. Seegmiller - --------------------------- ------------------------------- Date Dwight O. Seegmiller, President (Duly authorized officer of the registrant) /s/ James G. Pratt ------------------------------- James G. Pratt, Treasurer (Principal Financial Officer)
EX-11 2 HILLS BANCORPORATION EXHIBIT II COMPUTATION OF EARNINGS PER COMMON SHARE Three Months Ended Six Months Ended June 30 June 30 ---------------------- ---------------------- 1997 1996 1997 1996 --------- --------- --------- --------- Shares of common stock, beginning ............... 1,465,204 1,463,604 1,465,384 1,463,604 Options exercised during this period ... 2,055 - - - 2,055 - - - Shares redeemed during this period ..... - - - - - - (180) - - - --------- ---------- ---------- ---------- Shares of common stock, ending .................. 1,467,259 1,463,604 1,467,259 1,463,604 ========== ========== ========== ========== Weighted average number of shares outstanding # . 1,480,933 1,474,643 1,480,199 1,476,216 ========== ========== ========== ========== Earnings and Earnings Per Share: Net income (in thousands) .............. $ 1,935 $ 1,555 $ 3,546 $ 2,981 ========== ========== ========== ========== Earnings per common share .............. $ 1.31 $ 1.05 $ 2.40 $ 2.02 ========== ========== ========== ==========
EX-27 3
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE JUNE 30, 1997 FORM 10-Q OF HILLS BANCORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 6-MOS DEC-31-1997 JUN-30-1997 17,807 0 1,712 0 109,995 24,063 24,271 407,642 7,786 576,770 465,644 21,084 4,037 30,795 6,897 0 9,042 39,271 576,770 16,556 3,958 80 20,594 9,322 10,780 9,814 590 1,054 7,968 4,587 3,546 0 0 3,546 2.40 2.40 0 0 870 0 0 7,311 115 0 7,786 7,786 0 0
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