ITEM 1. BUSINESS
THE REGISTRANT
The Registrant was incorporated in 1982 under the laws of the State of West Virginia as a one-bank holding company known as Raleigh Bankshares, Inc. On January 3, 1984, the Bank of Raleigh became a wholly-owned subsidiary of Raleigh Bankshares.
Subsequent to 1984, the Board of Directors determined that the name, Raleigh Bankshares, may have had a constraining effect upon expansion activities. The shareholders approved an amendment on April 16, 1985, to change Raleigh Bankshares' name to Horizon Bancorp, Inc. ("Horizon" or "Horizon Bancorp").
Banking operations are, and are expected to continue to be, Horizon Bancorp's primary business and major source of revenue. For the most part, Horizon Bancorp derives its revenues from dividends paid by its subsidiary banks. The principal role of Horizon Bancorp is to supervise and coordinate the activities of the subsidiary banks.
Horizon has five operating subsidiaries, Bank of Raleigh ("Raleigh"), National Bank of Summers of Hinton ("Summers"), Greenbrier Valley National Bank ("Greenbrier"), The First National Bank in Marlinton ("Marlinton") and The Twentieth Street Bank ("Twentieth" or "Twentieth Street Bank").
Summers was acquired by Horizon on June 1, 1985, through a consolidation between Summers bank and NBS National Bank, a wholly-owned subsidiary of Horizon.
On September 19, 1988, Crossroads National Bank, Bradley, West Virginia, was merged with and into Raleigh. Greenbrier and Marlinton were acquired by Horizon on March 31, 1993, through a merger between Allegheny Bankshares Corporation and Horizon Bancorp, Inc. Twentieth was acquired by Horizon on August 30, 1996, through a merger between Twentieth Bancorp, Inc. and Horizon Bancorp, Inc.
At December 31, 1996, Horizon had consolidated assets of $947,068,000, deposits of $797,996,000 and shareholders' equity of $109,411,000.
Raleigh was originally chartered in 1899 as a state banking corporation with the name "Bank of Raleigh." It has conducted banking operations in Beckley, West Virginia, continuously since that time. In 1957, Beckley Industrial Savings and Loan Company merged into Raleigh, with Raleigh surviving the merger. As described above, Crossroads National Bank, Bradley, West Virginia, merged with and into Raleigh during 1988, and Crossroads' former office is operated as a branch of Raleigh.
Summers was incorporated in 1895 as a state banking corporation under the laws of the State of West Virginia with the name "The Bank of Summers." Summers opened for business in 1895 and operated as a state bank under the laws of the State of West Virginia from that date until 1906, when the Bank obtained a national charter and assumed its present name, "National Bank of Summers of Hinton."
Greenbrier was incorporated in 1901 as a national banking association with the name of "First National Bank of Alderson." An Agreement to Consolidate and Plan of Reorganization dated February 12, 1985, as amended by Amendment dated October 24, 1985, among Allegheny Bankshares Corporation, Greenbrier Valley Bank and First National Bank of Alderson ("Agreement; Plan of Reorganization") was entered into whereby Greenbrier Valley Bank was consolidated with First National Bank of Alderson and formed a new bank under the charter of First National Bank of Alderson and the title of Greenbrier Valley National Bank.
Marlinton was incorporated in 1902 as a national banking association under the laws of the United States.
Twentieth Street Bank was originally incorporated on September 11, 1905, as a state bank under the laws of West Virginia, and has operated as such since that time. In 1983, the Bank became a wholly owned subsidiary of Twentieth Bancorp, Inc., which was a one-bank holding company. Twentieth Street Bank's Milton branch was originally a separate corporation (Bank of Milton) incorporated on September 7, 1904, as a state bank under the laws of West Virginia and operated as such until being acquired by Twentieth Street Bank on June 30, 1985. Twentieth Street Bank's West Hamlin branch was originally a separate corporation (First National Bank of West Hamlin) incorporated on October 24, 1964, as a national bank. The First National Bank of West Hamlin was acquired by Twentieth Bancorp, Inc. on December 31, 1984. It continued to operate as a national bank until January 1, 1990, when its operations became branches of The Twentieth Street Bank, Inc. In December 1995, Twentieth added a new full service branch facility in Hamlin, West Virginia on State Route 3 located in Lincoln County.
During 1995, Horizon, through two of its subsidiary banks, purchased certain assets and assumed certain liabilities of a regional banking company. Greenbrier Valley National Bank acquired the regional branch office at Fairlea, Greenbrier County, on March 31, 1995. Bank of Raleigh acquired regional branch offices located at Beaver and Sophia, Raleigh County, and at Oak Hill in Fayette County on May 12, 1995. The assets of these offices acquired by Horizon totaled approximately $21,000,000.
The Board of Directors of Horizon implemented a dividend reinvestment plan in September 1995 for Horizon's shareholders. The purpose of the plan is to provide Horizon's shareholders with a convenient means of purchasing additional shares of common stock of Horizon through the investment of dividends. All shareholders are eligible to participate in the plan. The plan is voluntary, and all maintenance and transaction costs are paid by Horizon.
FUTURE ACQUISITIONS AND EXPANSIONS
Horizon has no plans, arrangements or understandings to acquire any other banking or banking-related businesses at this time.
EMPLOYEES
At the close of 1996, Horizon had 400 full-time equivalent employees.
COMPETITION
Raleigh's primary market area is generally defined as Raleigh County, West Virginia. At December 31, 1996, there were eight financial institutions operating in Raleigh County. Total deposits of the commercial banks in Raleigh County at December 31, 1996, were approximately $673,764,000, and Raleigh ranked first with 38.04% of the total deposits in Raleigh County. These institutions include One Valley Bank and United National Bank which are wholly-owned subsidiaries of state-wide multi-bank holding companies. Raleigh's largest competitor in the market area reported total deposits of $150,380,000 and the smallest competitor in the market area had total deposits of $11,873,000.
Five new banks have been chartered in Raleigh County since 1970. In addition, one federally-chartered savings and loan association has opened since 1980. Total deposits for Raleigh, however, have increased from the December 31, 1995 level of $251,906,000 to a December 31, 1996 level of $256,318,000.
The primary market area of Summers is generally defined as Summers County, West Virginia. At December 31, 1996, there were two banks operating in Summers County with total deposits of approximately $117,737,000. Summers had total deposits of $61,588,000 at December 31, 1996, and the other bank in the market area had total deposits of approximately $56,149,000 as of that date.
The primary market area of Greenbrier is generally defined as Greenbrier County, West Virginia. Greenbrier's market area is served by five financial institutions. These institutions include One Valley Bank and First State Bank and Trust, wholly-owned subsidiaries of state-wide multi-bank holding companies. At December 31, 1996, total deposits at these five financial institutions were approximately $476,368,000. Greenbrier is the largest of these five banks with 32.73% of the deposits in Greenbrier County. Greenbrier had total deposits of $155,939,000 at December 31, 1996, and the other banks within the market area had total deposits of approximately 67.27% as of that date.
Marlinton's primary market area is generally defined as Pocahontas County, West Virginia. There are two commercial banks within Marlinton's market area. At December 31, 1996, total deposits at these two commercial banks were approximately $100,293,000, and Marlinton held approximately 50.56% of the total deposits.
The primary market area of Twentieth is generally defined as Cabell, Wayne and Lincoln counties of West Virginia. Seven commercial banks and one federal savings bank are located in Twentieth's market area. At December 31, 1996, Twentieth had total deposits of $274,229,000, which ranked second in their area.
Horizon banks are subject to competition from less heavily regulated entities such as brokerage firms, money market mutual funds, consumer finance and credit card companies and other financial services companies. For instance, savings banks, savings and loan associations, credit unions, and issuers of commercial paper compete for funds and loans. In addition, personal and corporate trust and investment counseling services are offered by insurance companies, investment counseling firms and other firms and individuals.
Until 1992, the various banks and bank holding companies operating in West Virginia were predominantly owned by shareholders in West Virginia and were financed by operations arising principally in West Virginia. During 1992, BancOne Corp., the seventh largest bank holding company in the United States at that time, executed an Agreement with Key Centurion Bancshares, Inc., the largest bank holding company in the State, which provided for the acquisition of all of the outstanding stock of Key Centurion. In 1993, Huntington Bancshares, Incorporated consummated the acquisition of Commerce Banc Corporation.
In 1994, Congress passed the Riegle-Neal Interstate Banking and Branching Efficiency Act. Under this Act, absent action to opt out or limit interstate branching by the West Virginia Legislature, interstate branch banking may occur after June 1, 1997. The states are permitted: i) to opt into interstate branch banking prior to June 1, 1997; ii) to opt out of interstate branch banking prior to that date, iii) to allow only acquisition of branches; iv) to opt into DE NOVO interstate branch banking; or v) to allow the acquisition of a branch of a bank without acquiring the bank itself. In 1996, the West Virginia Legislative opted into interstate branch-banking, with De Novo branching or acquisition of branches without acquiring a bank on a reciprocal basis, effective May 31, 1997. The effect of this legislation will likely be increased competition for West Virginia banks, including the subsidiaries of Horizon.
SUPERVISION AND REGULATION
Horizon is a bank holding company within the provisions of the Bank Holding Company Act of 1956, is registered as such and is subject to supervision by the Board of Governors of the Federal Reserve System ("Federal Reserve"). Horizon is also a registered bank holding company within the provisions of the West Virginia Bank Holding Company laws (W.Va. Code 31A-8A-1 et seq.) ("West Virginia Act"), and is subject to the supervision of the West Virginia Board of Banking and Financial Institutions ("Board of Banking") and Commissioner of Banking. The Bank Holding Company Act and the West Virginia Act require Horizon to secure the prior approval of the Federal Reserve and the Board of Banking before Horizon acquires ownership or control of more than 5% of the voting shares or substantially all of the
assets of any institution, including another bank. In addition, the West Virginia Act prohibits a depository institution, including a bank holding company, from controlling more than 20% of the total deposits of all depository institutions in West Virginia.
As a bank holding company, Horizon is required to file with the Federal Reserve and the Commissioner of Banking annual reports and such additional information as the Federal Reserve may require pursuant to the Bank Holding Company Act and the Banking Commissioner may require under the West Virginia Act. The Federal Reserve and the Banking Commissioner may also make examinations of Horizon and any or all of its subsidiaries. Further, under Section 106 of the 1970 Amendments to the Bank Holding Act and the regulations of the Federal Reserve, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or any provision of credit, sale or lease of property or furnishing of services. In addition, pursuant to the United States Code, Horizon is considered an "affiliate" of the Banks and, as such, the Banks are subject to statutory limitations in extending credit to, or investing funds in, Horizon, and in accepting Horizon's securities or other obligations as collateral for any advances made by the Banks to any other entity or person.
Horizon is required to register annually with the Commissioner of Banking of West Virginia ("Commissioner") and to pay a registration fee to the Commissioner based on the total deposits in the banks with respect to which Horizon is a bank holding company. The registration fee is limited to ten dollars per million dollars in deposits rounded off to the nearest million dollars. Horizon is also under the regulatory control of the Commissioner.
The operations of Raleigh and Twentieth are subject to federal and state statutes, which apply to state-chartered banks and to non-members of the Federal Reserve. Raleigh and Twentieth's operations are also subject to regulations of the Board of Banking, the Federal Reserve and the Federal Deposit Insurance Corporation ("FDIC").
The primary supervisory authorities of Raleigh and Twentieth are the FDIC and the Commissioner of Banking. The FDIC and Banking Commissioner regularly examine such areas as reserves, loans, investments, management practices and other aspects of Raleigh and Twentieth's operations. Independent of those examinations, both supervisory authorities also conduct regular examinations of Raleigh and Twentieth's Trust Department. These examinations are designed for the protection of Raleigh and Twentieth's depositors and not for its shareholders. In addition to these regular examinations, Raleigh and Twentieth must furnish to the FDIC and the Board of Banking quarterly reports containing full and accurate statements of their affairs.
The operations of Greenbrier, Marlinton and Summers are subject to federal and state statutes which apply to national banks and to members of the Federal Reserve. Greenbrier's, Marlinton's and Summers' operations are also subject to regulations of the FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency ("Comptroller"). The primary supervisory authority of Greenbrier, Marlinton and Summers is the Comptroller, which regularly examines such areas as reserves, loans, investments, management practices, and other aspects of its affairs.
The Banks are members of the FDIC, and their deposits are insured as provided by law. Raleigh and Twentieth are members of the Federal Reserve System and also carry FDIC insurance.
In addition to the effect of general economic conditions, the earnings of Horizon are affected by the fiscal and monetary policies of the Federal Reserve, which regulates the national money supply in order to mitigate recessionary and inflationary pressures. The techniques used by the Federal Reserve include setting the reserve requirements of member and nonmember banks, establishing interest rates on time and savings deposits and the discount rate on member bank borrowings, and conducting open market operations in United States government securities to exercise control over the supply of money and credit.
The policies of the Federal Reserve have a direct and indirect effect on the amount of bank loans and deposits, and the interest rates charged and paid thereon. While the impact of current economic conditions and the policies of the Federal Reserve and other regulatory authorities designed to deal with these conditions upon the future business and earnings of the Banks cannot be accurately predicted, those policies can materially affect the revenues and income of commercial banks.
COMPLIANCE WITH ENVIRONMENTAL LAWS
The costs and effects of compliance with federal, state and local environmental laws are not expected to have a material effect on Horizon or the Banks.
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
Statistical disclosures required by bank holding companies are included in "Five-Year Selected Financial Summary" on page 5 and in "Management's Discussion and Analysis of Operations" set forth on pages 5 through 21 of Horizon's Annual Report to Shareholders for the fiscal year ended December 31, 1996. That information is incorporated herein by reference.
ITEM 2.
ITEM 2. PROPERTIES
Horizon's principal office is located in the Bank of Raleigh at One Park Avenue, Beckley, West Virginia. Raleigh has a full-service branch consisting of the former offices of Crossroads National Bank at the Crossroads Mall, Bradley, West Virginia. In addition, a full-service branch is located at the corner of Main and Kanawha Streets, Beckley, West Virginia. During 1995, branches in Kroger supermarkets were acquired from a regional bank and are located at Beaver and Sophia, Raleigh County, and at Oak Hill in Fayette County.
The operations of Summers are conducted at its main office of 123 Temple Street in Hinton, West Virginia and a full-service branch facility at Country Roads Plaza on Stokes Drive.
Greenbrier's main office is located at 109 South Jefferson Street, Lewisburg, West Virginia. Greenbrier has four full service branch offices located in Alderson, Rainelle, Fairlea, and Rupert, West Virginia. During 1995, a branch in a Kroger supermarket was acquired from a regional bank and is located at Fairlea.
The principal office of Marlinton is located at 300 Eighth Street, Marlinton, Pocahontas County, West Virginia.
The operations of Twentieth are conducted at 1900 Third Avenue, Huntington, West Virginia. Twentieth has four full service branch offices located at Route 60 East, Huntington, Milton, Hamlin and West Hamlin, West Virginia. In addition, a limited-service facility is located on Fifth Avenue, Huntington, West Virginia.
Horizon also offers services to its customers at various locations within the service area through automated teller machines. The automated teller machines permit customers to make deposits, withdrawals, and loan payments at these locations, and the banks have joined a regional network.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Horizon and its banks are involved in various legal proceedings arising in the normal course of business. It is anticipated that the ultimate resolution of these proceedings will not have a material adverse effect on the financial position or operations of Horizon or the banks.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The section of Management's Discussion and Analysis of Financial Condition and Results of Operations entitled "Market and Dividend Information" on page 20 of Horizon's 1996 Annual Report to Shareholders is incorporated herein by reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Table 1, "Five-Year Selected Financial Summary," on page 5 of Horizon's 1996 Annual Report to Shareholders is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 5 through 20 of Horizon's 1996 Annual Report to Shareholders is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent auditors and consolidated financial statements included on pages 21 through 39 of Horizon's 1996 Annual Report to Shareholders are incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF HORIZON
The information set forth in the sections "Management Nominees to the Board of Directors," "Executive Officers of Horizon" and "Section 16(a) Beneficial Ownership Reporting Compliance" on pages 3 through 8, pages 9 through 10 and pages 13 through 14, respectively, of Horizon's definitive Proxy Statement for the 1997 Annual Meeting of Shareholders are incorporated herein by reference.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the sections "Executive Compensation" on pages 15 through 18 and "Compensation of Directors" on page 8 of Horizon's definitive Proxy Statement for the 1997 Annual Meeting of Shareholders are incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth in the section "Security Ownership of Certain Beneficial Owners and Management" on pages 11 through 13 of Horizon's definitive Proxy Statement for the 1997 Annual Meeting of Shareholders are incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth in the section "Certain Relationships and Related Transactions and Compensation and Benefits Committee Interlocks and Insider Participation" on pages 22 through 24 of Horizon's definitive Proxy Statement for the 1997 Annual Meeting of Shareholders and the information set forth in Note 4 on page 31 of Horizon's 1996 Annual Report to Shareholders are incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements on pages 23 through 39 of Horizon's 1996 Annual Report to Shareholders are incorporated herein by reference:
Consolidated balance sheets--December 31, 1996 and 1995
Consolidated statements of income--years ended December 31, 1996, 1995, and
Consolidated statements of shareholders' equity--years ended December 31, 1996, 1995, and 1994
Consolidated statements of cash flows--years ended December 31, 1996, 1995, and 1994
Notes to consolidated financial statements--December 31, 1996
(a)(2) None.
(a)(3) Exhibits required by item 601 - see listing of exhibits on page 9
(b) Reports on Form 8-K
(c) Exhibits - exhibits for this 10-K begin on page 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 25th day of March, 1997.
HORIZON BANCORP, INC.
By: /s/ FRANK S. HARKINS, JR. ----------------------------- Frank S. Harkins, Jr. Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on the 25th day of March, 1997.
ITEM 14 - Index to Exhibits