Manasota Group, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.1 - Manasota Group, Inc.	v222549_ex32-1.htm
EX-32.2 - Manasota Group, Inc.	v222549_ex32-2.htm
EX-31.2 - Manasota Group, Inc.	v222549_ex31-2.htm
EX-31.1 - Manasota Group, Inc.	v222549_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

Form 10-Q

x	Quarterly report under section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2011
o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ______ to ______

Commission file number 333-71773

Horizon Bancorporation, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Florida

(State or Other Jurisdiction of

Incorporation or Organization)

65-0840545

(IRS Employer

Identification No.)

2504 64th Street Court East

Bradenton, Florida 34208

(Address of Principal Executive Offices)

(941) 745-2101

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 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.

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act) (Check one):

Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer o	Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

Common Stock $0.01 Par Value as of May 6, 2011: Issued 1,809,912 Shares; Outstanding: 1,770,139 Shares

Index

Part I. Financial Information

Item 1.	Financial Statements (unaudited)

Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010		3

Consolidated Statements of Income for the Three Months Ended March 31, 2011 and 2010		4

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010		5

Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended March 31, 2011 and 2010		6

Notes to Consolidated Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14

Item 4T.	Controls and Procedures	14

Part II.	Other Information

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	16

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3.	Defaults Upon Senior Securities	16

Item 4.	Submission of Matters to a Vote of Security Holders	16

Item 5.	Other Information	16

Item 6.	Exhibits	16

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

HORIZON BANCORPORATION, INC.

Consolidated Balance Sheets

	March 31, 2011			December 31, 2010
Cash and due from banks	$	8,399		$	13,440

Property and equipment, net		1,240,208			1,247,180
Assets of discontinued operations		-----0-----			-----0-----
Other assets		3,000			3,000
Total Assets	$	1,251,607		$	1,263,620
LIABILITIES & SHAREHOLDERS’ EQUITY
Liabilities:
Liabilities of discontinued operations		------0-----			------0-----
Note payable		991,127			981,782
Other liabilities		91,000			91,000
Total Liabilities	$	1,082.127		$	1,072,782
Shareholders’ Equity:
Preferred stock, $.01 par value, 1.0 million shares authorized; zero shares issued and outstanding	$	—		$	—
Treasury Stock: 39,773 shares		(479,393	)		(479,393	)
Common stock, $.01 par value, 25,000,000 shares authorized; 1,809,912 issued and 1,770,139 outstanding at March 31, 2011 and December 31, 2010.		18,099			18,099
Paid-in-capital		10,428,214			10,428,214
Retained (deficit)		(9,797,440	)		(9,776,082	)
Accumulated other comprehensive income/(loss), net of tax		-----0-----			-----0-----
Total Shareholders’ Equity	$	169,480		$	190,838
Total Liabilities and Shareholders’ Equity	$	1,251,607		$	1,263,620

See accompanying notes to the financial statements

HORIZON BANCORPORATION, INC.

Consolidated Statements of Income (Unaudited)

	Three Months Ended March 31,
	2011			2010
Operating Income
Gain on sale of asset		-------0-----			------0------
Other miscellaneous income		64			------0------
Total operating income	$	64		$	------0------
Operating Expenses
Interest expense on note		9,346			15,093
Other operating expenses		12,077			5,347
Total operating expenses	$	21,423		$	20,440
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX PROVISION	$	(21,359	)	$	(20,440	)
Income tax provision/(benefit)		-----0-----			(6,950	)
LOSS FROM CONTINUING OPERATIONS	$	(21,359	)	$	(13,490	)
DISCONTINUED OPERATIONS
Loss from discontinued operations		-----0------			(2,715,420	)
Income tax provision/(benefit)		-----0------			(870,679	)
LOSS ON DISCONTINUED OPERATIONS		-----0------			(1,844,741	)

NET LOSS	$	(21,359	)	$	( 1,858,231	)
Net (loss) per common share: basic and diluted, from:
Continuing operations	$	(.01	)	$	(.01	)
Discontinued operations		(0.00	)		(1.05	)
NET LOSS PER BASIC AND DILUTED SHARE	$	(0.01	)	$	(1.06	)
Weighted average number of shares outstanding:
Basic and Diluted		1,770,139			1,770,139

See accompanying notes to the financial statements

HORIZON BANCORPORATION, INC.

Consolidated Statements of Cash Flows (Unaudited)

	Three Months ended March 31
	2011			2010
Cash flow from operating activities:
Net cash from operating activities	$	(14,387	)	$	44,985

Cash flow from investing activities:
Decrease in property and equipment	$	-----0----		$	-----0----
Net cash from investing activities	$	-----0----		$	----0----

Cash flow from financing activities:
Increase/(Decrease) in note payable	$	9,346		$	(40,000	)

Net cash from financing activities	$	9,346		$	(40,000	)

Net change in cash and cash equivalents	$	(5,041	)	$	4,985
Cash and cash equivalents, beginning of period		13,440			376
Cash and cash equivalents, end of period	$	8,399		$	5,361

See accompanying notes to the financial statements

HORIZON BANCORPORATION, INC.

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

for the Three-month periods ended March 31, 2011 and 2010

													Accumulated
													Other
	Common Stock				Treasury			Paid in		Retained			Comprehensive
	Shares		Par Value		Stock			Capital		Earnings			Income			Total
Balance December 31 , 2009		1,770,139	$	18,099	$	(479,393	)	$	10,428,214	$	(4,006,176	)	$	(293,583	)	$	5,667,161
Comprehensive Income:
Net income/(loss), three month period ended March 31, 2010										$	(1,858,231	)				$	(1,858,231	)
Net unrealized income on securities from discontinued operations, three-month period ended March 31, 2010														87,674		$	87,674
Total comprehensive income/(loss),net of tax																	(1,770,557	)
Balance March 31,2010		1,770,139	$	18,099	$	(479,393	)	$	10,428,214	$	(5,864,407	)	$	(205,909	)	$	3,896,604
Balance December 31 , 2010		1,770,139	$	18,099	$	(479,393	)	$	10,428,214	$	(9,776,082	)		----0----		$	190,838
Net income/(loss), three-month period ended March 31, 2011											(21,359	)				$	(21,359	)
Balance March 31 , 2011		1,770,139	$	18,099	$	(479,393	)	$	10,428,214	$	(9,797,440	)		-----0-----		$	169,480

NOTE 1 - ORGANIZATION and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Horizon Bancorporation, Inc., Bradenton, Florida (the “Company”) was a one-bank holding company with respect to Horizon Bank, Bradenton, Florida (the “Bank”). The Company commenced banking operations on October 25, 1999 when the Bank opened for business. On September 10, 2010, the Company ceased to be a bank holding company when the Florida Office of Financial Regulation (the “OFR”) closed the Bank and the Federal Deposit Insurance Corporation (the “FDIC”) was appointed as receiver. The FDIC sold the Bank to the Bank of the Ozarks. The Bank was primarily engaged in the business of obtaining deposits and providing commercial, consumer, and real estate loans to the general public. Bank deposits were each insured up to $250,000 by the FDIC subject to certain limitations.

The Company is authorized to issue up to 25.0 million shares of its $.01 par value per share common stock. Each share is entitled to one vote and shareholders have no preemptive or conversion rights. As of March 31, 2011 and December 31, 2010 there were 1,809,912 shares issued and 1,770,139 shares of the Company’s common stock outstanding. As of March 31, 2011 and December 31, 2010 the Company held 39,773 shares of treasury stock. Additionally, the Company has authorized the issuance of up to 1.0 million shares of its $.01 par value per share preferred stock. The Company’s Board may, without further action by the shareholders, direct the issuance of preferred stock for any proper corporate purpose with preferences, voting powers, conversion rights, qualifications, special or relative rights and privileges which could adversely affect the voting power or other rights of shareholders of common stock. Effective October 22, 2009, the Company’s Board designated, by amending the Articles of Incorporation, a series of preferred stock. The series, designated as Series A Preferred Stock, consists of 5,000 shares with a liquidation preference of $1,000 per share. As of March 31, 2011 and December 31, 2010, there were no shares of the Company’s preferred stock issued or outstanding.

Basis of Presentation and Reclassification. The consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year’s amounts have been reclassified to conform to the current year presentation; such reclassifications had no impact on shareholders’ equity.

Uses of Estimates. The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles and to general practices within the banking industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for possible loan losses, the valuation of foreclosed real estate, the fair value of financial instruments, other than temporary impairment analysis, and the realization of deferred tax assets.

Cash and Cash Equivalents. Cash and cash equivalents include cash, demand balances due from banks, federal funds sold, and interest bearing deposits due from other banks, all of which mature within 90 days.

Earnings Per Share. Basic earnings per share are determined by dividing net income by the weighted-average number of common shares outstanding. Diluted income per share is determined by dividing net income by the weighted average number of common shares outstanding increased by the number of common shares that would be issued assuming exercise of stock options. This also assumes that only options with an exercise price below the existing market price will be exercised. In computing net income per share, the Company uses the treasury stock method.

Comprehensive Income. Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. Comprehensive income for calendar year 2010 is shown in the consolidated statements of changes in shareholders’ equity.

Discontinued Operations. The Company’s primary asset at December 31, 2009, was its subsidiary bank. On September 10, 2010, the Bank was closed by OFR and the FDIC was appointed as the receiver. All balance sheet and operating data for the Bank as of March 31, 2010 are reflected as discontinued operations.

A summary of the results of operations of the discontinued Bank for the year ended March 31, 2010, follows:

Interest income	$	2,565,917
Interest expense		1,047,427
Net interest income		1,518,490
Provision for possible loan losses		2,697,973
Net interest income after provision for loan losses		(1,179,483	)
Non-interest income		15,838
Non-interest expense		(1,551,775	)
Loss before income tax		(2,715,420	)
Income tax (benefit)		(870,679	)
Net (loss)	$	(1,844,741	)

NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

In July 2010, the FASB issued ASU 2011-20, Receivables (Topic 310): Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The objective of this ASU is for an entity to provide disclosures that facilitate financial statement users’ evaluation of the nature of credit risk inherent in the entity’s portfolio of financing receivables, how that risk is analyzed and assessed in arriving at the allowance for credit losses, and the changes and reasons for those changes in the allowance for credit losses. Disclosures should be provided based on portfolio segment and class of financing receivable. Additional disclosures by class of financing receivable will be required relating to credit quality indicators, aging of past due financing receivables, and the nature and extent of troubled debt restructurings during the period. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

In January 2010, the FASB issued ASU 2011-01, Receivables (Topic 310): Deferral of the Effective Date of Disclosure about Troubled Debt Restructurings in Update 2011-20. The amendments in ASU 2011-01 temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU No. 2011-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The delay is intended to allow the FASB time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.

NOTE 3 – REGULATORY MATTERS, COMPANY LOAN, GOING CONCERN CONSIDERATION & EQUITY OFFERING

Regulatory Matters

(a) Written Agreement

On November 10, 2009, the Federal Reserve Bank of Atlanta (the “FRB”), the OFR and the Bank have mutually agreed to enter into a Written Agreement (“the Agreement”). The Agreement contains a list of strict requirements with which the Bank must comply. A summary of the Agreement is as follows:

·	Submit a written plan to strengthen Board oversight of the management and operations of the Bank.

·	Submit a written plan to strengthen the Bank’s management of commercial real estate concentrations, including steps to reduce the risk of concentrations.

·	Submit a written plan to strengthen credit risk management practices.

·	Submit a written plan to strengthen lending and credit administration policies, procedures, and practices.

·	Retain an independent and acceptable (to FRB, OFR) consultant to assess the level of risk or exposure in the portion of the Bank’s loan portfolio not reviewed at the most recent regulatory examination.

·	Submit a written plan to provide for the ongoing review and grading of the Bank’s loan portfolio by a qualified independent party.

The Bank shall not, directly or indirectly, extend or renew any credit to or for the benefit of any borrower, including related interest of the borrower, who is obligated to the Bank on any extension of credit that have been charged off by the Bank, or classified “loss” in the most recent report of examination or in any subsequent report of examination so long as such credit remains uncollected.

The Bank shall not, directly or indirectly, extend or renew any credit to or for the benefit of any borrower, including related interest of the borrower, whose extension of credit has been classified as “doubtful” or “substandard” in the most recent report of examination or in any subsequent report of examination without the prior approval of the Bank’s Board of Directors.

·	Submit a written plan for each problem loan and for other real estate exceeding $250,000 that is designed to improve the Bank’s position with respect to the above assets.

·	Provide a written report after each calendar quarter updating each asset improvement plan; in addition, provide the problem loan list, a listing of past due/non-accrual loans, and a list of all loan renewals and extensions for which the Bank did not collect the full interest.

·	Eliminate from the Bank’s balance sheet all assets or portions of assets classified “loss” in the most recent report of examination as well as in future reports of examination.

·	Review and revise the methodology used to construct the allowance for loan and lease losses (“the ALLL”). Upon completion, submit the ALLL methodology to the regulators for their review.

·	Submit a written plan for the maintenance of an adequate ALLL, with periodic updates incorporating all changes.

Submit a written plan for maintaining sufficient capital at the Bank, including an analysis of current and future capital needs as well as compliance with capital adequacy guidelines and ratios. In measuring capital adequacy, consideration of the volume and severity of classified credits, portfolio concentration, adequacy of the ALLL, projected growth in assets and earnings, among others, should be taken into account.

Notify the regulators, in writing, shortly after the end of each calendar quarter if any of the Bank’s capital ratios (total risk-based, Tier 1, or Leverage) had fallen below the approved capital plan’s minimum ratios. Contemporaneously, provide a plan that details steps to be taken by the Bank to increase the affected capital ratios to or above the approved capital plan’s minimums.

·	Provide a written plan to strengthen the oversight of the Bank’s audit program by the Audit Committee.

·	Submit a written plan to improve management of the Bank’s liquidity position and funds management practices. A contingency funding plan should be provided as well.

·	Submit written policies and procedures to strengthen the management of the Bank’s investment portfolio.

·	Submit a business plan for calendar year 2011 to improve the Bank’s earnings and overall condition. The plan shall include a realistic and comprehensive operational budget and balance sheet projections.

·	The Bank shall not declare or pay dividends without the prior approval of FRB and OFR.

·	Ascertain full compliance with respect to appointments of new directors, and new executive officers, including the assumption of new responsibilities by an existing executive officer. Also, ascertain compliance with restrictions on indemnification and severance payments.

Form a new Board Committee, the Compliance Committee, to monitor and coordinate the Bank’s compliance with the provisions of the Agreement. The Compliance Committee shall include a majority of outside directors who are not executive officers or principal shareholders. Shortly after the end of each calendar quarter, the Bank shall submit a written progress report detailing the form and manner of all actions taken to secure compliance with the Agreement.

All written plans, programs, policies and procedures that are submitted by the Bank, shall be acceptable to FRB and OFR, and within the prescribed time period. Once approved by the regulators, the Bank shall adopt the approved plans, programs, policies and procedures within ten days and implement them promptly.

With the exception of one item, management believes that the Bank was in compliance with the Agreement. The one unresolved item was the requirement to increase capital to acceptable levels.

(b) Prompt Corrective Action Directive

On March 9, 2010, the Board of Governors of the Federal Reserve System (the “Board of Governors”) delivered to Horizon Bank, the Company’s wholly-owned subsidiary (the “Bank”), a Prompt Corrective Action Directive Issued Pursuant to Section 38 of the Federal Deposit Insurance (“FDI”) Act, As Amended (the “PCA Directive”). The PCA Directive, which was dated March 4, 2010, states that the Bank has been undercapitalized and has not filed an acceptable capital restoration plan. Accordingly, the PCA Directive directs the Bank, the Company and the Bank’s Board to:

Not later than 45 days from March 4, 2010, increase the Bank’s equity through the sale of shares or contribution to surplus sufficient to make the Bank adequately capitalized, enter into and close a contract to be acquired or combine with another depository institution, or take other necessary measures to make the Bank adequately capitalized.

·	Comply fully with the provisions of Section 38 of the FDI Act restricting the Bank from making any capital distributions.

Refrain, without prior written approval of the FRB, from soliciting, accepting or renewing time deposits bearing an interest rate exceeding the prevailing interest rates in the Bank’s market area, and, within 30 days, submit an acceptable plan and timetable to the FRB for conforming such interest rates to the prevailing interest rates.

·	Comply with the provisions of Section 38 of the FDI Act requiring that all transactions between the Bank and any affiliate comply with Section 23A of the Federal Reserve Act.

·	Comply with the provisions of Section 38 of the FDI Act restricting the payment of bonuses to senior executive officers and increases in compensation of such officers, and

·	Comply with the provisions of Section 38 of the FDI Act restricting asset growth, acquisitions, branching and new lines of business.

Any material failure to comply with the provisions of the Agreement or PCA Directive could result in further enforcement actions by the regulators. Such additional enforcement actions may include the placement of the Bank into receivership/conservatorship. On September 10, 2011, the regulators closed the Bank due to the Bank’s inability to comply with the capital requirements detailed under the Agreement and the PCA Directive.

On September 10, 2010, the Bank was closed by the OFR and placed into receivership with the FDIC. The inability to comply with regulatory capital directives together with the increasing levels in non-performing assets were the primary causes of the Bank’s failure.

The original Bank building is the main asset that is currently owned by the Company. In the past few months, the FDIC has contested the Company’s ownership of the building. However, the FDIC is also in negotiations with the Company for leasing the building. If the negotiations are successful, rent receipts will be sufficient to cover the monthly mortgage obligations as well as, possibly, other operational expenses. The building is shown as an asset in the Company’s balance sheet as of March 31, 2011 and December 31, 2010.

Prior to the Bank’s closing, the Company filed for an income tax refund in the amount of approximately $1.6 million. The FDIC claims that since the substantial majority of the refund amount is due to the Bank’s, as opposed to the Company’s prior losses, the substantial majority of the refund thereof belongs to the Bank and, by extension, to the FDIC as the receiver of the Bank. Since it is unclear as to what portion of the tax refund belongs to the Company, a matter that is currently being negotiated with the FDIC, the tax refund is not shown as a receivable in the Company’s balance sheet as of March 31, 2011 or December 31,2010.

Going Concern Consideration

In the past two calendar years, the Company has experienced heavy losses that caused the capital accounts to be reduced by approximately 98%. The Bank, the Company’s sole subsidiary, was closed by the banking regulators. Moreover, the ownership of the Company’s primary asset, a building, is being contested by the FDIC. For the reasons enumerated above, there exist substantial doubt about the Company’s ability to continue as a going concern. As discussed earlier, the Company is in negotiation with the FDIC concerning ownership, whole or in part, with respect to two items: (i) a building that is on the Company’s 2011 and 2010 financial statements and (ii) a tax refund in the approximate amount of $1.6 million that is not part of the Company’s 2011 financial statements. The FDIC is also in negotiations with the Company about leasing the above building for three years. Should the lease negotiations prove successful, the lease payments will cover the current mortgage payments as well as, possibly, other operational expenses. The overall plan is to liquidate all of the Company assets, pay all debts and return excess funds, if available, to shareholders.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

Equity Offering

The Company commenced an equity offering of shares of 7% Series A Cumulative Convertible Preferred Stock in late 2010. The above offering was terminated in 2011 following the Bank closing, and all proceeds collected were returned.

Item 2: Management’s Discussion and Analysis of Financial Condition and Operations Forward Looking Statements

This Quarterly Report on Form 10-Q contains or incorporates by reference statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Forward-looking statements are generally identifiable by the use of forward-looking terminology such as “anticipate,” “assume,” “believe,” “continue,” “could,” “would,” “endeavor,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and other similar words and expressions of future intent.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could cause actual results and performance to differ from those expressed in our forward-looking statements we make or incorporate by reference in this Quarterly Report on Form 10-Q include, but are not limited to:

the effects of the current global economic crisis, including, without limitation, the dramatic deterioration of real estate values, the subprime mortgage, credit and liquidity markets, as well as the Federal Reserve’s actions with respect to interest rates, may lead to a further deterioration in credit quality, thereby requiring continued increases in our provision for loan losses, or a reduced demand for credit, which will continue to negatively impact our earnings;

·	the imposition of enforcement orders, capital directives or other enforcement actions by the Federal Reserve, including restrictions and limitations that might be placed on the Bank pursuant to the Written Agreement described below;

possible changes in trade, monetary and fiscal policies, as well as legislative and regulatory changes, including changes in accounting standards and banking, securities and tax laws and regulations and governmental intervention in the U.S. financial system, as well as changes affecting financial institutions’ ability to lend and otherwise do business with consumers;

·	increases in our nonperforming assets, or our inability to recover or absorb losses created by such nonperforming assets;

·	our ability to effectively manage liquidity risk, interest rate risk and other market risk, credit risk and operational risk

·	our ability to manage negative developments and disruptions in the credit and lending markets, including the impact of the ongoing credit crisis on our business and on the businesses of our customers as well as other financial institutions with which we have commercial relationships;

·	the continuation of the recent unprecedented volatility in the credit markets and overall economy;

·	possible changes in the quality or composition of our loans or investment portfolios, including further adverse developments in the real estate markets, the borrowers’ industries or in the repayment ability of individual borrowers or issuers;

·	changes in the interest rate yield curve such as flat, inverted or steep yield curves, or changes in the interest rate environment that impact interest margins and may impact prepayments on the mortgage-backed securities portfolio;

·	our ability to manage fluctuations in the value of assets and liabilities and off-balance sheet exposure so as to maintain sufficient capital and liquidity to support our business;

the failure of our assumptions underlying the establishment of allowances for loan losses and other estimates, or dramatic changes in those underlying assumptions or judgments in future periods, that, in either case, render the allowance for loan losses inadequate or require that further provisions for loan losses be made;

·	unexpected outcomes of existing or new litigation;

·	the threat or occurrence of war or acts of terrorism and the existence or exacerbation of general geopolitical instability and uncertainty;

·	management’s ability to develop and execute plans to effectively respond to the Orders and any unexpected events in the future; and

·	other factors and information contained in this Quarterly Report on Form 10-Q and other reports that we file with the Securities and Exchange Commission (SEC) under the Exchange Act.

The cautionary statements in this Quarterly Report on Form 10-Q also identify important factors and possible events that involve risk and uncertainties that could cause our actual results to differ materially from those contained in the forward-looking statements. These forward-looking statements speak only as of the date on which the statements were made. We do not intend, and undertake no obligation, to update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.

Readers should carefully review all disclosures we file from time to time with the SEC.

DESCRIPTION OF BUSINESS

ORGANIZATION

Horizon Bancorporation, Inc. (hereinafter, the “Company” or the “Registrant”) was incorporated in the State of Florida on May 27, 1998, under the name of Manasota Group, Inc., for the purpose of becoming a bank holding company owning all of the outstanding capital stock of Horizon Bank, a commercial bank chartered under the laws of Florida (the “Bank”). In anticipation of the filing for regulatory approval for the Bank, the Company amended its Articles of Incorporation on October 2, 1998, changing its name to Horizon Bancorporation, Inc., authorizing additional capital stock and adopting anti-takeover provisions typical of a bank holding company for a community bank. All of the regulatory approvals necessary for the operation of the Company and the Bank were granted as of October 25, 1999.

The Company began its initial public offering of the Common Stock at $5.50 per share on February 9, 1999, and completed its minimum offering of 1,023,638 shares on October 13, 1999. Of the total proceeds of $5,630,009, the Company used $5,280,000 to capitalize the Bank, which opened for business on October 25, 1999. The Company raised an additional $673,414.50 as of December 31, 1999, when the offering closed, with a total of 1,146,077 shares of Common Stock sold for the aggregate amount of $6,303,423.50 (the “Initial Offering”).

To satisfy its needs for additional capital, in April 2003, the Company conducted a public offering solely to its existing shareholders (the “Rights Offering”), whereby each shareholder could purchase one unit for each 3.333 shares of the Company’s common stock already owned. Each unit consisted of one share of the Company’s common stock and one warrant (expiring on July 6, 2005) to purchase one share of the Company’s common stock for $7.00 per share, subject to certain limitations. The Company sold 246,038 units for $6.00 per unit. In an unrelated private placement, also during 2003, the Company sold 100,000 units, each consisting of one share of common stock and one warrant (expiring on August 12, 2005) to purchase one-half of one share of the Company’s common stock at $3.50 (or $7.00 per share), for $6.00 per unit. Total proceeds to the Company from the Rights Offering and the private placement, amounted to $2,043,012, net of direct selling expenses.

On or about July 6, 2005, all of the warrants issued in the Rights Offering and the private placement were either exercised or expired. Total proceeds from such exercise amounted to $1,941,793.

On May 10, 2004, the Company registered, by filing an SEC Form 8A, the Common Stock under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”). Subsequently, in November 2004, the Common Stock began trading in the OTCBB under the Symbol “HZNB”.

The Company currently maintains its corporate offices at 2504 64th Street Court East, Bradenton, Florida 34208.

BUSINESS

Horizon Bancorporation, Inc., Bradenton, Florida (the “Company”), acted as a one-bank holding company with respect to Horizon Bank, Bradenton, Florida (the “Bank”), from October 25, 1999 when the Bank commenced operations, until September 10, 2010, when the Florida Office of Financial Regulation (the “OFR”) declared the Bank to be insolvent. The Bank was closed, with the FDIC being appointed as receiver therefor, and sold to Bank of the Ozarks.

In the short run, management intends to maintain the Company’s status as a reporting public company, which, if an appropriate opportunity arises, may engage in a transaction with an operating company. There is no assurance that, in the long run, we will be able to maintain such status and consummate any such transaction.

DESCRIPTION OF PROPERTY

In August 2000, the Company moved its operations into a new one-story building located at 900 53rd Avenue East, in Bradenton (the “Building”). The Building, after the addition of almost 2,000 square feet of interior space in August, 2004, consists of approximately 7,000 square feet of interior space, four interior teller windows, four exterior drive-through teller stations and 36 parking spaces. The interior includes executive offices, work stations for support staff and safe deposit box storage areas. The original total cost of the Building, including the costs of construction, landscaping, and furniture and equipment, was approximately $1.7 million. The 2004 addition cost the Company approximately $260,000, and the Company spent another approximately $40,000 to furnish the additional space with furniture and equipment. Subsequently all furniture and equipment was taken into receivership by the FDIC. At present, Bank of the Qzarks is operating out of this location.

Results of Operations

Overall Net Income

The Company reported a net loss of $21,000 for the quarter ended March 31, 2011, compared to a net loss of $1,858,000 for the quarter ended March 31, 2010. In 2010 the loss was attributable almost entirely to a loss of $1,845,000 at the closed Bank. Basic and diluted losses per share were $0.01 for the three months ended March 31, 2011. Basic and diluted losses per share for the three months ended March 31, 2010 were $1.06 of which $1.05 was attributable to the closed Bank.

Balance Sheet Analysis

Total Assets

As of March 31, 2011, total assets of the Company were $1,251,607 compared to $1,263,620 at December 31, 2010, a decrease of $12,000. This decrease is due to the payment of operating expenses out of cash reserves.

Item 3: Quantitative and Qualitative Disclosure About Market Risk

Not applicable.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon management’s evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, the Chief Executive Officer and Chief Financial Officer of the Company concluded that, subject to the limitations noted below, the Company’s disclosure controls and procedures (as defined in Rule 13a-14 under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Controls Over Financial Reporting.

There have been no changes in the Company’s internal control over financial reporting during the first Three months of 2011 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management (including our Chief Executive Officer and Acting Chief Financial Officer) does not expect that our financial reporting, disclosure controls and other internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override or the control.

The design of the system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There have been no material changes to the pending legal proceedings to which the Company or the Bank is a party since the filing of the Registrant’s Form 10-K for the year ended December 31, 2010.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not Applicable.

Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits

31.1		Certification of Chief Executive Officer

31.2		Certification of Acting Chief Financial Officer

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		/s/ Charles S. Conoley
		Charles S. Conoley
		President and Chief Executive Officer
		(Principal Executive Officer)


		/s/ Kathleen M. Jepson
		Kathleen M. Jepson
		Acting Chief Financial Officer
		(Principal Financial and Accounting Officer)

Date: May 12, 2011

Manasota Group, Inc. - FORM 10-Q - May 16, 2011

Attached files

Manasota Group, Inc. Reports