Horizon Bancorp Announces its 2015 Third Quarter Earnings

MICHIGAN CITY, Ind.--()--(NASDAQ: HBNC) – Horizon Bancorp today announced its unaudited financial results for the three and nine-month periods ended September 30, 2015.

SUMMARY:

  • On July 1, 2015, Horizon closed the acquisition of Peoples Bancorp (“Peoples”) and its wholly-owned subsidiary, Peoples Federal Savings Bank of DeKalb County, headquartered in Auburn, Indiana.
  • The quarterly dividend was increased from $.14 to $.15 per share on September 15, 2015.
  • Third quarter 2015 net income was $4.3 million or $.36 diluted earnings per share.
  • Excluding merger expenses and gain on sale of investment securities, net income for the third quarter of 2015 increased 52.8% compared to the same period of 2014 to $6.7 million or $.56 diluted earnings per share.
  • Net income for the first nine months of 2015 was $14.4 million or $1.37 diluted earnings per share.
  • Excluding merger expenses, gain on sale of investment securities and the death benefit on bank owned life insurance, net income for the first nine months of 2015 increased 28.3% compared to the same period of 2014 to $17.2 million or $1.64 diluted earnings per share.
  • Net interest income for the first nine months of 2015 increased 17.3% or $8.1 million compared to the same period in 2014.
  • The net interest margin, excluding the impact of acquisitions (“core net interest margin”), decreased 7 basis points from the linked quarter and 3 basis points in the first nine months of 2015 compared to the same periods in 2014.
  • Non-interest income for the first nine months of 2015 increased 15.9% or $3.1 million compared to the same period in 2014.
  • Excluding the Peoples acquisition, mortgage warehouse loans and loans held for sale, loans increased 11.9% on an annualized basis during the third quarter of 2015.
  • Horizon’s tangible book value per share increased to $16.37 at September 30, 2015, compared to $16.26 at December 31, 2014 and $15.75 at September 30, 2014.
  • Horizon Bank’s capital ratios, including Tier 1 Capital to Average Assets of 9.35% and Total Capital to Risk Weighted Assets of 13.03% as of September 30, 2015, continue to be well above the regulatory standards for well-capitalized banks.

Craig Dwight, Chairman and CEO, commented: “Horizon continued its growth story in the third quarter of 2015 with positive contributions from all four revenue streams - retail banking, business banking, mortgage banking and wealth management. These results are particularly noteworthy as the Peoples integration and systems conversion required a tremendous amount of teamwork and dedication during the quarter.”

Dwight continued, “Horizon’s growth drove a substantial increase in net income and earnings per share compared to the same periods of 2014. Net income and diluted earnings per share, excluding non-core items, increased 57.0% and 26.7% during the third quarter of 2015, respectively. On a year-to-date basis, net income and diluted earnings per share, excluding non-core items, increased by 30.0% and 17.8%, respectively. Given the persistent low interest rate environment, loan and fee income growth and the ability to create operating leverage are critical to combat margin pressure existing throughout the banking industry.”

 
Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share
(Dollar in Thousands Except per Share Data, Unaudited)
       
Three Months Ended Nine Months Ended
September 30 September 30

Non-GAAP Reconciliation of Net Income

2015   2014   2015   2014
(Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Net income as reported $ 4,288 $ 4,958 $ 14,374 $ 13,153
Merger expenses 3,648 124 4,364 1,335
Tax effect   (1,219 )     (43 )     (1,402 )     (467 )
Net income excluding merger expenses 6,717 5,039 17,336 14,021
 
Gain on sale of investment securities - (988 ) (124 ) (988 )
Tax effect   -       346       43       346  
Net income excluding gain on sale of investment securities 6,717 4,396 17,255 13,379
 
Death benefit on bank owned life insurance ("BOLI") - - (145 ) -
Tax effect   -       -       51       -  
Net income excluding death benefit on BOLI 6,717 4,396 17,161 13,379
 
Acquisition-related PAUs (402 ) (438 ) (2,282 ) (2,027 )
Tax effect   141       153       799       709  
Net income excluding PAUs $ 6,456     $ 4,112     $ 15,678     $ 12,061  
 

Non-GAAP Reconciliation of Diluted Earnings per Share

Diluted earnings per share as reported $ 0.36 $ 0.51 $ 1.37 $ 1.39
Merger expenses 0.30 0.01 0.42 0.14
Tax effect   (0.10 )     (0.00 )     (0.13 )     (0.05 )
Diluted earnings per share excluding merger expenses 0.56 0.52 1.66 1.48
 
Gain on sale of investment securities - (0.10 ) (0.01 ) (0.11 )
Tax effect   -       0.03       0.00       0.04  
Net income excluding gain on sale of investment securities 0.56 0.45 1.65 1.41
 
Death benefit on BOLI - - (0.01 ) -
Tax effect   -       -       0.00       -  
Net income excluding death benefit on BOLI 0.56 0.45 1.64 1.41
 
Acquisition-related PAUs (0.03 ) (0.05 ) (0.22 ) (0.22 )
Tax effect   0.01       0.02       0.08       0.08  
Diluted earnings per share excluding PAUs $ 0.54     $ 0.42     $ 1.50     $ 1.27  
 

Dwight commented, “Due to a decline in mortgage refinancing activity, Horizon’s mortgage warehouse portfolio returned to more normalized levels during the third quarter of 2015. This decrease was partially offset by continued organic growth in other loan types and the addition of loans acquired in the Peoples transaction. Excluding loans acquired in the Peoples acquisition, mortgage warehouse loans and loans held for sale, loans increased by 11.9% on an annualized basis in the third quarter of 2015 and 12.2% on an annualized basis during the first nine months of 2015 compared to the same periods of 2014.”

Dwight continued, “Horizon’s strategy of revenue diversification through commercial loan growth and non-mortgage related fee income is evident in our results. At its peak, for the year ended December 31, 2012 mortgage warehouse and mortgage gain on sale revenue comprised 24.5% of Horizon’s total revenue base (interest income and non-interest income). For the year ending December 31, 2014 and the nine months ending September 30, 2015, mortgage warehouse and mortgage gain on sale revenue as a percentage of total revenue declined to 12.8% and 14.7%, respectively.”

 
Loan Growth by Type, Excluding Acquired Loans
Three Months Ended September 30, 2015
(Dollars in Thousands, Unaudited)
          Excluding Acquired Loans
Acquired     Annualized
September 30 June 30 Amount Peoples Amount Percent Percent
    2015   2015   Change   Loans   Change   Change   Change
Commercial loans $ 795,271 $ 709,946 $ 85,325 $ (67,435 ) $ 17,890 2.5 % 10.0 %
Residential mortgage loans 430,477 277,407 153,070 (136,861 ) 16,209 5.8 % 23.2 %
Consumer loans   361,298     336,006     25,292       (19,593 )     5,699   1.7 % 6.7 %
Subtotal 1,587,046 1,323,359 263,687 (223,889 ) 39,798 3.0 % 11.9 %
Held for sale loans 5,583 7,677 (2,094 ) - (2,094 ) -27.3 % -108.2 %
Mortgage warehouse loans   138,974     195,924     (56,950 )     -       (56,950 ) -29.1 % -115.3 %
Total loans $ 1,731,603   $ 1,526,960   $ 204,643     $ (223,889 )   $ (19,246 ) -1.3 % -5.0 %
 
Loan Growth by Type, Excluding Acquired Loans
Nine Months Ended September 30, 2015
(Dollars in Thousands)
Excluding Acquired Loans
Acquired Annualized
September 30 December 31 Amount Peoples Amount Percent Percent
2015 2014 Change Loans Change Change Change
    (Unaudited)                        
Commercial loans $ 795,271 $ 674,314 $ 120,957 $ (67,435 ) $ 53,522 7.9 % 10.6 %
Residential mortgage loans 430,477 254,625 175,852 (136,861 ) 38,991 15.3 % 20.5 %
Consumer loans   361,298     320,459     40,839       (19,593 )     21,246   6.6 % 8.9 %
Subtotal 1,587,046 1,249,398 337,648 (223,889 ) 113,759 9.1 % 12.2 %
Held for sale loans 5,583 6,143 (560 ) - (560 ) -9.1 % -12.2 %
Mortgage warehouse loans   138,974     129,156     9,818       -       9,818   7.6 % 10.2 %
Total loans $ 1,731,603   $ 1,384,697   $ 346,906     $ (223,889 )   $ 123,017   8.9 % 11.9 %
 

The following table presents Horizon’s core net interest margin, which excludes acquisition-related purchase accounting adjustments. Dwight noted, “The Peoples transaction created a slight reduction in Horizon’s net interest margin. The reduction was partially alleviated due to the mix of earning assets as the cash from Peoples’ liquidated securities portfolio was used to redeem short-term borrowings at the close of the transaction reducing interest-earning assets throughout the third quarter. During the quarter, a portion of the cash from the liquidated securities portfolio was used to repurchase securities and pay down a matured long-term FHLB advance.”

To reduce funding costs over the next four years the Company currently plans to use the securities portfolio to redeem maturing long-term debt. As of September 30, 2015, $31.6 million of long-term debt is scheduled to mature in 2016, $47.5 million in 2017, $27.0 million in 2018 and $55.2 million in 2019. This deleveraging will help reduce the Company’s cost of funds and provide additional capital for growth.

 
Non-GAAP Reconciliation of Net Interest Margin
(Dollar Amounts in Thousands, Unaudited)
  Three Months Ended   Nine Months Ended
September 30   June 30   September 30 September 30

Net Interest Margin As Reported

2015   2015   2014   2015   2014
Net interest income $ 19,776 $ 17,850 $ 16,400 $ 54,512   $ 46,460
Average interest-earning assets 2,304,515 2,008,191 1,877,066 2,072,276 1,770,187
Net interest income as a percent of average interest-
earning assets ("Net Interest Margin") 3.51 % 3.67 % 3.59 % 3.59 % 3.62 %
 

Impact of Acquisitions

Interest income from acquisition-related
purchase accounting adjustments ("PAUs") $ (402 ) $ (797 ) $ (438 ) $ (2,282 ) $ (2,027 )
 

Excluding Impact of Acquisitions

Net interest income $ 19,374 $ 17,053 $ 15,962 $ 52,230 $ 44,433
Average interest-earning assets 2,304,515 2,008,191 1,877,066 2,072,276 1,770,187
Core Net Interest Margin 3.44 % 3.51 % 3.50 % 3.44 % 3.47 %
 

Horizon’s loan loss reserve ratio, excluding loans with credit-related purchase accounting adjustments, was 1.13% as of September 30, 2015.

 
Allowance for Loan and Lease Loss Detail
As of September 30, 2015
(Dollars in Thousands, Unaudited)
         
Horizon
Legacy   Heartland   Summit   Peoples   Total
Pre-discount loan balance $ 1,409,298 $ 26,496 $ 81,421 $ 218,195 $ 1,735,410
 
Allowance for loan losses (ALLL) 15,896 264 8 - 16,168
Loan discount   N/A       1,576       3,213       4,601       9,390  
ALLL+loan discount 15,896 1,840 3,221 4,601 25,558
                 
Loans, net $ 1,393,402     $ 24,656     $ 78,200     $ 213,594     $ 1,709,852  
 
ALLL/ pre-discount loan balance 1.13 % 1.00 % 0.01 % 0.00 % 0.93 %
Loan discount/ pre-discount loan balance N/A 5.95 % 3.95 % 2.11 % 0.54 %
ALLL+loan discount/ pre-discount loan balance 1.13 % 6.94 % 3.96 % 2.11 % 1.47 %
 

Income Statement Highlights

Net income for the third quarter of 2015 was $4.3 million or $.36 diluted earnings per share compared to $4.9 million or $.51 diluted earnings per share in the third quarter of 2014. The decrease in net income and earnings per share from the previous year reflects an increase in non-interest expenses of $6.9 million primarily due to an increase in salaries and employee benefits and outside services and consultants expense, partially offset by an increase in net interest income of $3.4 million, a decrease in provision for loan losses of $1.4 million and an increase in non-interest income of $1.0 million. The decrease in earnings per share also reflects an increase in diluted shares due to the Peoples acquisition. Excluding acquisition-related expenses and purchase accounting adjustments and gain on sale of investment securities, net income for the third quarter of 2015 was $6.5 million or $.54 diluted earnings per share compared to $4.1 million or $.42 diluted earnings per share in the same period of 2014.

Net income for the nine months ended September 30, 2015 was $14.4 million or $1.37 diluted earnings per share compared to $13.2 million or $1.39 diluted earnings per share for the nine months ended September 30, 2014. The increase in net income from the previous year reflects an increase in net interest income of $8.1 million and an increase in non-interest income of $3.1 million, partially offset by an increase in the provision for loan losses of $740,000 and an increase in non-interest expenses of $8.7 million. The decrease in earnings per share also reflects an increase in diluted shares due to the Peoples acquisition. Excluding acquisition-related expenses and purchase accounting adjustments, gain on sale of investment securities and the death benefit on bank owned life insurance, net income for the first nine months of 2015 was $15.7 million or $1.50 diluted earnings per share compared to $12.1 million or $1.27 diluted earnings per share in the same period of 2014.

Horizon’s net interest margin was 3.51% during the third quarter of 2015, down from 3.67% for the prior quarter and 3.59% for same period of 2014. The decrease in net interest margin compared to the prior quarter and the same period of 2014 was due to lower yields on new loans and re-pricing earning assets and a decrease in interest income from acquisition-related purchase accounting adjustments. Excluding acquisition-related purchase accounting adjustments, the margin would have been 3.44% for the third quarter of 2015 compared to 3.51% for the prior quarter and 3.50% for the same period of 2014. Interest income from acquisition-related purchase accounting adjustments was $402,000, $797,000, and $438,000 for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively.

Horizon’s net interest margin was 3.59% for the nine months ending September 30, 2015, down from 3.62% for same period of 2014. Excluding interest income from acquisition-related purchase accounting adjustments, the margin would have been 3.44% for the nine months ending September 30, 2015 compared to 3.47% for same period of 2014. Interest income from acquisition-related purchase accounting adjustments was $2.3 million and $2.0 million for the nine months ended September 30, 2015 and September 30, 2014, respectively.

Residential mortgage lending activity during the third quarter of 2015 generated $2.8 million in income from the gain on sale of mortgage loans, an increase of $641,000 from the same period of 2014. Total origination volume in the third quarter of 2015, including loans placed into portfolio, totaled $127.5 million, representing an increase of 24.8% from the same period of 2014 of $102.2 million. Purchase money mortgage originations during the third quarter of 2015 represented 81.0% of total originations compared to 71.8% of originations during the previous quarter and 77.6% during the third quarter of 2014.

Lending Activity

Total loans increased $346.9 million from $1.4 billion as of December 31, 2014 to $1.7 billion as of September 30, 2015 as mortgage warehouse loans increased by $9.8 million, residential mortgage loans increased by $175.9 million and consumer loans increased by $40.8 million. Commercial loans increased $121.0 million or 10.5% on an annualized basis from $674.3 million at December 31, 2014 to $795.3 million at September 30, 2015.

Total loan balances in the Kalamazoo and Indianapolis markets continued to grow during the third quarter of 2015 to $166.8 million and $151.2 million, respectively, as of September 30, 2015. In the third quarter of 2015, Kalamazoo’s aggregate loan balances increased $12.4 million or 8.0%, and Indianapolis’ aggregate loan balances increased $5.7 million or 3.9%. Combined, these markets contributed $18.1 million in loan growth during the third quarter of 2015 or 6.0%.

The provision for loan losses was $300,000 for the third quarter of 2015 compared to $1.7 million for the same period of 2014. The lower provision for loan losses in the third quarter of 2015 compared to the same period of the previous year was predominantly due a $1.0 million charge-off associated with one commercial credit during the third quarter of 2014. The provision for loan losses was $2.8 million the first nine months of 2015 compared to $2.1 million for the same period of 2014. The higher provision for loan losses in the first nine months of 2015 compared to the same period of 2014 was due to the charge-off of one commercial credit of $1.3 million in the second quarter of 2015 as well as continued loan growth. The $1.3 million commercial charge-off was a legacy workout loan that was determined to be impaired due to the borrower’s inability to make payments and a decrease in collateral value.

The ratio of the allowance for loan losses to total loans decreased to 0.93% as of September 30, 2015 from 1.19% as of December 31, 2014 due to an increase in total loans and a decrease in the allowance for loan losses from $16.5 million as of December 31, 2014 to $16.2 million as of September 30, 2015. The Peoples transaction added $223.9 million in loans without a loan loss reserve due to purchase accounting adjustments. As of September 30, 2015, the ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 1.13% compared to 1.29% as of December 31, 2015.

Non-performing loans totaled $21.0 million as of September 30, 2015 and $22.4 million as of December 31, 2014. Compared to December 31, 2014, non-performing commercial loans and consumer loans decreased by $707,000 and $927,000, respectively, while non-performing real estate loans increased by $253,000. As a percentage of total loans, non-performing loans were 1.21% at September 30, 2015, down 41 basis points from 1.62% at December 31, 2014.

Expense Management

Total non-interest expense was $6.9 million higher in the third quarter of 2015 compared to the same period of 2014. The increase was primarily due to an increase in salaries and employee benefits costs of $2.4 million, outside services and consultants expense of $2.6 million and other expense of $547,000, reflecting overall company growth and the Peoples acquisition. One-time non-interest expense related to the Peoples acquisition totaled $3.6 million in the third quarter of 2015.

Total non-interest expense was $8.7 million higher in the first nine months of 2015 compared to the same period of 2014. The increase was primarily due to an increase in salaries and employee benefits costs of $3.6 million, outside services and consultants expense of $2.2 million, other expenses of $817,000, net occupancy expenses of $461,000, data processing expense of $456,000, professional fees of $211,000, loan expense of $486,000, FDIC deposit insurance expense of $245,000 and other losses of $253,000 due to overall company growth and the Peoples acquisition. One-time non-interest expense related to the Peoples acquisition totaled $4.4 million in the third quarter of 2015.

Use of Non-GAAP Financial Measures

Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non-GAAP financial measures of the net interest margin and the allowance for loan and lease losses excluding the impact of acquisition-related purchase accounting adjustments and net income and diluted earnings per share excluding the impact of one-time costs related to acquisitions, acquisition-related purchase accounting adjustments and other events that are considered to be non-recurring. Horizon believes that these non-GAAP financial measures are helpful to investors and provide a greater understanding of our business without giving effect to the purchase accounting impacts and one-time costs of acquisitions and non-core items, although these measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure.

About Horizon

Horizon Bancorp is a locally owned, independent, commercial bank holding company serving Northern and Central Indiana and Southwest and Central Michigan through its commercial banking subsidiary Horizon Bank, NA. Horizon also offers mortgage-banking services throughout the Midwest. Horizon Bancorp may be reached online at www.horizonbank.com. Its common stock is traded on the NASDAQ Global Select Market under the symbol HBNC.

Forward Looking Statements

This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon. For these statements, Horizon claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in its Form 10-K. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

         
HORIZON BANCORP
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
 
September 30 June 30 March 31 December 31 September 30
2015   2015   2015   2014   2014
Balance sheet:
Total assets $ 2,606,833 $ 2,219,307 $ 2,153,965 $ 2,076,922 $ 2,037,045
Investment securities 617,860 493,631 495,315 489,531 495,941
Commercial loans 795,271 709,946 695,736 674,314 677,349
Mortgage warehouse loans 138,974 195,924 178,899 129,156 105,133
Residential mortgage loans 430,477 277,407 260,390 254,625 251,739
Consumer loans 361,298 336,006 326,334 320,459 308,800
Earning assets 2,363,286 2,031,671 1,974,251 1,885,576 1,860,041
Non-interest bearing deposit accounts 338,436 307,215 285,181 267,667 278,527
Interest bearing transaction accounts 1,164,787 983,912 905,216 930,582 881,299
Time deposits 409,852 293,596 274,699 284,070 289,837
Borrowings 372,820 385,236 440,415 351,198 350,113
Subordinated debentures 32,758 32,719 32,680 32,642 32,603
Common stockholders' equity 252,238 189,631 186,991 181,914 177,280
Total stockholders’ equity 264,738 202,131 199,491 194,414 189,780
 
Income statement: Three months ended
Net interest income $ 19,776 $ 17,850 $ 16,886 $ 16,523 $ 16,400
Provision for loan losses 300 1,906 614 978 1,741
Non-interest income 8,400 7,186 7,066 6,738 7,390
Non-interest expenses 22,235 16,650 16,068 15,671 15,353
Income tax expense   1,353       1,752       1,912       1,664       1,738  
Net income 4,288 4,728 5,358 4,948 4,958
Preferred stock dividend   (31 )     (31 )     (31 )     (31 )     (40 )
Net income available to common shareholders $ 4,257     $ 4,697     $ 5,327     $ 4,917     $ 4,918  
 
Per share data:
Basic earnings per share $ 0.37 $ 0.51 $ 0.58 $ 0.53 $ 0.53
Diluted earnings per share 0.36 0.49 0.55 0.51 0.51
Cash dividends declared per common share 0.15 0.14 0.14 0.14 0.13
Book value per common share 21.14 20.49 20.25 19.75 19.25
Tangible book value per common share 16.37 17.06 16.80 16.26 15.75
Market value - high 26.15 26.03 25.86 26.73 23.67
Market value - low $ 22.60 $ 22.85 $ 22.38 $ 22.83 $ 20.65
Weighted average shares outstanding - Basic 11,605,976 9,240,005 9,216,011 9,212,156 9,208,707
Weighted average shares outstanding - Diluted 11,893,254 9,637,586 9,609,506 9,628,240 9,588,332
 
Key ratios:
Return on average assets 0.69 % 0.87 % 1.05 % 0.96 % 0.96 %
Return on average common stockholders' equity 8.70 9.88 11.66 10.72 10.95
Net interest margin 3.51 3.67 3.70 3.64 3.59
Loan loss reserve to total loans 0.93 1.08 1.13 1.19 1.20
Non-performing loans to loans 1.21 1.51 1.52 1.62 1.47
Average equity to average assets 8.36 9.32 9.56 9.56 9.33
Bank only capital ratios:
Tier 1 capital to average assets 9.35 8.18 8.75 8.80 8.63
Tier 1 capital to risk weighted assets 12.17 11.04 11.47 11.96 12.13
Total capital to risk weighted assets 13.03 12.08 12.54 13.08 13.26
 
Loan data:
Substandard loans $ 25,898 $ 28,220 $ 27,355 $ 27,661 $ 35,023
30 to 89 days delinquent 4,868 3,326 3,945 5,082 3,310
 
90 days and greater delinquent - accruing interest $ 100 $ 207 $ 19 $ 115 $ 62
Trouble debt restructures - accruing interest 2,948 3,271 4,368 4,372 5,838
Trouble debt restructures - non-accrual 3,994 4,523 4,711 2,643 3,061
Non-accrual loans   13,956       15,050       13,282       15,312       10,828  
Total non-performing loans $ 20,998     $ 23,051     $ 22,380     $ 22,442     $ 19,789  
 
   

HORIZON BANCORP

Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
 
September 30 September 30
2015   2014
Balance sheet:
Total assets $ 2,606,833 $ 2,037,045
Investment securities 617,860 495,941
Commercial loans 795,271 677,349
Mortgage warehouse loans 138,974 105,133
Residential mortgage loans 430,477 251,739
Consumer loans 361,298 308,800
Earning assets 2,363,286 1,860,041
Non-interest bearing deposit accounts 338,436 278,527
Interest bearing transaction accounts 1,164,787 881,299
Time deposits 409,852 289,837
Borrowings 372,820 350,113
Subordinated debentures 32,758 32,603
Common stockholders' equity 252,238 177,280
Total stockholders’ equity 264,738 189,780
 
Income statement: Nine Months Ended
Net interest income $ 54,512 $ 46,460
Provision for loan losses 2,820 2,080
Non-interest income 22,652 19,539
Non-interest expenses 54,953 46,275
Income tax expense   5,017       4,491  
Net income 14,374 13,153
Preferred stock dividend   (94 )     (102 )
Net income available to common shareholders $ 14,280     $ 13,051  
 
Per share data:
Basic earnings per share $ 1.42 $ 1.45
Diluted earnings per share 1.37 1.39
Cash dividends declared per common share 0.43 0.37
Book value per common share 21.14 19.25
Tangible book value per common share 16.37 15.75
Market value - high 26.15 24.91
Market value - low $ 22.38 $ 19.57
Weighted average shares outstanding - Basic 10,029,419 9,009,663
Weighted average shares outstanding - Diluted 10,387,113 9,389,359
 
Key ratios:
Return on average assets 0.86 % 0.92 %
Return on average common stockholders' equity 10.03 10.56
Net interest margin 3.59 3.62
Loan loss reserve to total loans 0.93 1.20
Non-performing loans to loans 1.21 1.47
Average equity to average assets 9.05 9.25
Bank only capital ratios:
Tier 1 capital to average assets 9.35 8.63
Tier 1 capital to risk weighted assets 12.17 12.13
Total capital to risk weighted assets 13.03 13.26
 
Loan data:
Substandard loans $ 25,898 $ 35,023
30 to 89 days delinquent 4,868 3,310
 
90 days and greater delinquent - accruing interest $ 100 $ 62
Trouble debt restructures - accruing interest 2,948 5,838
Trouble debt restructures - non-accrual 3,994 3,061
Non-accrual loans   13,956       10,828  
Total non-performing loans $ 20,998     $ 19,789  
         
HORIZON BANCORP
Allocation of the Allowance for Loan and Lease Losses

(Dollars in Thousands, Unaudited)

 
September 30 June 30 March 31 December 31 September 30
2015   2015   2015   2014   2014
Commercial $ 8,841 $ 8,386 $ 7,876 $ 7,910 $ 7,515
Real estate 2,297 3,044 3,281 2,508 3,304
Mortgage warehousing 1,015 1,319 1,272 1,132 1,300
Consumer   4,015     3,672     4,205     4,951     4,041
Total $ 16,168   $ 16,421   $ 16,634   $ 16,501   $ 16,160
 
 
Net Charge-offs (Recoveries)

(Dollars in Thousands, Unaudited)

 
Three months ended
September 30   June 30   March 31   December 31   September 30
2015   2015   2015   2014   2014
Commercial $ 77 $ 1,584 $ (11 ) $ 199 $ 1,006
Real estate 96 161 20 101 19
Mortgage warehousing - - - - -
Consumer   380     375     472       336     217
Total $ 553   $ 2,120   $ 481     $ 636   $ 1,242
 
         
Total Non-performing Loans

(Dollars in Thousands, Unaudited)

 
September 30 June 30 March 31 December 31 September 30
2015   2015   2015   2014   2014
Commercial $ 10,832 $ 13,384 $ 11,540 $ 11,855 $ 9,323
Real estate 6,315 5,819 6,062 5,894 6,312
Mortgage warehousing - - - - -
Consumer   3,851     3,848     4,778     4,693     4,154
Total $ 20,998   $ 23,051   $ 22,380   $ 22,442   $ 19,789
 
         
Other Real Estate Owned and Repossessed Assets

(Dollars in Thousands, Unaudited)

 
September 30 June 30 March 31 December 31 September 30
2015   2015   2015   2014   2014
Commercial $ 324 $ 376 $ 307 $ 411 $ 376
Real estate 958 58 219 636 875
Mortgage warehousing - - - - -
Consumer   -     37     223     154     3
Total $ 1,282   $ 471   $ 749   $ 1,201   $ 1,254
 
         
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)

 
Three Months Ended Three Months Ended
September 30, 2015 September 30, 2014
Average     Average Average     Average
Balance   Interest   Rate Balance   Interest   Rate
 
ASSETS
Interest-earning assets
Federal funds sold $ 23,086 $ 2 0.03 % $ 4,033 $ 5 0.49 %
Interest-earning deposits 16,340 5 0.12 % 5,941 4 0.27 %
Investment securities - taxable 401,702 2,149 2.12 % 394,954 2,330 2.34 %
Investment securities - non-taxable (1) 154,050 1,125 4.39 % 146,513 1,109 4.48 %
Loans receivable (2)(3)   1,709,337       20,297 4.72 %   1,325,625       16,403 4.92 %
Total interest-earning assets (1) 2,304,515 23,578 4.17 % 1,877,066 19,851 4.32 %
 
Non-interest-earning assets
Cash and due from banks 31,384 27,188
Allowance for loan losses (16,427 ) (15,706 )
Other assets   151,035     155,021  
 
$ 2,470,507   $ 2,043,569  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 1,568,777 $ 1,566 0.40 % $ 1,204,122 $ 1,352 0.45 %
Borrowings 303,521 1,729 2.26 % 320,676 1,593 1.97 %
Subordinated debentures   32,737       507 6.14 %   32,580       506 6.16 %
Total interest-bearing liabilities 1,905,035 3,802 0.79 % 1,557,378 3,451 0.88 %
 
Non-interest-bearing liabilities
Demand deposits 343,780 282,494
Accrued interest payable and
other liabilities 15,149 12,979
Stockholders' equity   206,543     190,718  
 
$ 2,470,507   $ 2,043,569  
 
Net interest income/spread $ 19,776 3.38 % $ 16,400 3.44 %
 
Net interest income as a percent
of average interest earning assets (1) 3.51 % 3.59 %
(1)   Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
(3) Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees.
         
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)

 
Nine Months Ended Nine Months Ended
September 30, 2015 September 30, 2014
Average     Average Average     Average
Balance   Interest   Rate Balance   Interest   Rate
ASSETS
Interest-earning assets
Federal funds sold $ 10,563 $ 11 0.14 % $ 6,559 $ 9 0.18 %
Interest-earning deposits 11,927 10 0.11 % 6,547 7 0.14 %
Investment securities - taxable 375,548 6,356 2.26 % 395,255 7,108 2.40 %
Investment securities - non-taxable (1) 145,576 3,281 3.96 % 146,643 3,328 4.33 %
Loans receivable (2)(3)   1,528,662       55,140 4.83 %   1,215,183       45,988 5.07 %
Total interest-earning assets (1) 2,072,276 64,798 4.25 % 1,770,187 56,440 4.37 %
 
Non-interest-earning assets
Cash and due from banks 30,729 26,736
Allowance for loan losses (16,557 ) (15,892 )
Other assets   155,657     140,698  
 
$ 2,242,105   $ 1,921,729  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 1,347,882 $ 4,035 0.40 % $ 1,171,343 $ 3,984 0.45 %
Borrowings 340,593 4,747 1.86 % 274,322 4,493 2.19 %
Subordinated debentures   32,698       1,504 6.15 %   32,541       1,503 6.18 %
Total interest-bearing liabilities 1,721,173 10,286 0.80 % 1,478,206 9,980 0.90 %
 
Non-interest-bearing liabilities
Demand deposits 303,309 253,331
Accrued interest payable and
other liabilities 14,692 12,454
Stockholders' equity   202,931     177,738  
 
$ 2,242,105   $ 1,921,729  
 
Net interest income/spread $ 54,512 3.45 % $ 46,460 3.47 %
 
Net interest income as a percent
of average interest earning assets (1) 3.59 % 3.62 %
(1)   Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
(3) Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees.
 
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands)

   
September 30 December 31
2015   2014
(Unaudited)    
Assets
Cash and due from banks $ 48,155 $ 43,476
Investment securities, available for sale 435,673 323,764
Investment securities, held to maturity (fair value of $188,575 and $169,904) 182,187 165,767
Loans held for sale 5,583 6,143
Loans, net of allowance for loan losses of $16,168 and $16,501 1,709,852 1,362,053
Premises and equipment, net 60,700 52,461
Federal Reserve and Federal Home Loan Bank stock 13,823 11,348
Goodwill 49,214 28,176
Other intangible assets 7,648 3,965
Interest receivable 10,862 8,246
Cash value of life insurance 54,148 39,382
Other assets   28,988     32,141
Total assets $ 2,606,833   $ 2,076,922
Liabilities
Deposits
Non-interest bearing $ 338,436 $ 267,667
Interest bearing   1,574,639     1,214,652
Total deposits 1,913,075 1,482,319
Borrowings 372,820 351,198
Subordinated debentures 32,758 32,642
Interest payable 490 497
Other liabilities   22,952     15,852
Total liabilities   2,342,095     1,882,508
Commitments and contingent liabilities
Stockholders’ Equity
Preferred stock, Authorized, 1,000,000 shares
Series B shares $.01 par value, $1,000 liquidation value
Issued 12,500 shares 12,500 12,500
Common stock, no par value
Authorized, 22,500,000 shares
Issued, 11,987,424 and 9,278,916 shares
Outstanding, 11,931,987 and 9,213,036 shares - -
Additional paid-in capital 106,083 45,916
Retained earnings 144,344 134,477
Accumulated other comprehensive income   1,811     1,521
Total stockholders’ equity   264,738     194,414
Total liabilities and stockholders’ equity $ 2,606,833   $ 2,076,922
   
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Per Share Data, Unaudited)

 
Three Months Ended Nine Months Ended
September 30   September 30
2015   2014   2015   2014
(Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Interest Income    
Loans receivable $ 20,297 $ 16,403 $ 55,140 $ 45,988
Investment securities
Taxable 2,156 2,339 6,377 7,124
Tax exempt   1,125       1,109       3,281       3,328  
Total interest income   23,578       19,851       64,798       56,440  
Interest Expense
Deposits 1,566 1,352 4,035 3,984
Borrowed funds 1,729 1,593 4,747 4,493
Subordinated debentures   507       506       1,504       1,503  
Total interest expense   3,802       3,451       10,286       9,980  
Net Interest Income 19,776 16,400 54,512 46,460
Provision for loan losses   300       1,741       2,820       2,080  
Net Interest Income after Provision for Loan Losses   19,476       14,659       51,692       44,380  
Non-interest Income
Service charges on deposit accounts 1,359 1,076 3,443 3,037
Wire transfer fees 160 151 493 408
Interchange fees 1,625 1,223 4,093 3,436
Fiduciary activities 1,520 1,131 4,033 3,378
Gain on sale of investment securities (includes $0 for the three months
ended and $124 for the nine months ended September 30, 2015 and
$988 for the three and nine months ended September 30, 2014, related
to accumulated other comprehensive earnings reclassifications) - 988 124 988
Gain on sale of mortgage loans 2,794 2,153 7,815 6,101
Mortgage servicing income net of impairment 246 116 725 556
Increase in cash value of bank owned life insurance 374 296 889 781
Death benefit on bank owned life insurance - - 145 -
Other income   322       256       892       854  
Total non-interest income   8,400       7,390       22,652       19,539  
Non-interest Expense
Salaries and employee benefits 10,652 8,215 27,541 23,991
Net occupancy expenses 1,723 1,404 4,649 4,188
Data processing 1,281 907 3,170 2,714
Professional fees 409 358 1,596 1,385
Outside services and consultants 3,209 595 4,753 2,554
Loan expense 1,351 1,202 3,975 3,489
FDIC insurance expense 423 313 1,099 854
Other losses 246 (35 ) 351 98
Other expense   2,941       2,394       7,819       7,002  
Total non-interest expense   22,235       15,353       54,953       46,275  
Income Before Income Tax 5,641 6,696 19,391 17,644
Income tax expense (includes $0 for the three months ended and $43
for the nine months ended September 30, 2015 and $346 for the three
and nine months ended September 30, 2014, related to income
tax expense from reclassification items)   1,353       1,738       5,017       4,491  
Net Income 4,288 4,958 14,374 13,153
Preferred stock dividend   (31 )     (40 )     (94 )     (102 )
Net Income Available to Common Shareholders $ 4,257     $ 4,918     $ 14,280     $ 13,051  
Basic Earnings Per Share $ 0.37 $ 0.53 $ 1.42 $ 1.45
Diluted Earnings Per Share 0.36 0.51 1.37 1.39

Contacts

Horizon Bancorp
Mark E. Secor
Chief Financial Officer
(219) 873-2611
Fax: (219) 874-9280

Contacts

Horizon Bancorp
Mark E. Secor
Chief Financial Officer
(219) 873-2611
Fax: (219) 874-9280