Market Overview

Horizon Bancorp Announces Its 2015 Second Quarter Earnings

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MICHIGAN CITY, Ind.--(BUSINESS WIRE)--

(NASDAQ: HBNC) – Horizon Bancorp today announced its unaudited financial results for the three and six-month periods ended June 30, 2015.

SUMMARY:

  • On July 1, 2015, Horizon closed the acquisition of Peoples Bancorp and its wholly-owned subsidiary, Peoples Federal Savings Bank of DeKalb County, headquartered in Auburn, Indiana. Peoples' results are not included in Horizon's June 30, 2015 financial results.
  • Total loans increased 16.2% on an annualized basis during the second quarter of 2015.
  • Commercial loans increased 8.2% on an annualized basis during the second quarter of 2015.
  • Second quarter 2015 net income was $4.7 million or $.49 diluted earnings per share.
  • Excluding merger expenses, net income for the second quarter of 2015 was $5.2 million or $.53 diluted earnings per share.
  • Pre-tax, pre-provision income for the second quarter of 2015 was $8.4 million, an increase of 19.7% compared to the same period of 2014 and 6.4% compared to the previous quarter.
  • Net income for the first six months of 2015 increased 23.1% compared to the same period of 2014 to $10.1 million or $1.04 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 six months of 2015 was $10.4 million or $1.08 diluted earnings per share.
  • Pre-tax, pre-provision income for the first six months of 2015 was $16.3 million, an increase of 44.1% compared to the first six months of 2014.
  • Net interest income for the first six months of 2015 increased 15.6% or $4.7 million compared to the same period in 2014.
  • The net interest margin, excluding the impact of acquisitions ("core net interest margin"), increased 4 basis points from the linked quarter and 5 basis points in the first six months of 2015 compared to the same period of 2014.
  • Non-interest income for the first six months of 2015 increased 17.3% or $2.1 million compared to the same period in 2014.
  • Horizon's tangible book value per share rose to $17.06 at June 30, 2015, compared to $16.26 at December 31, 2014 and $15.47 at June 30, 2014.

Craig Dwight, Chairman and CEO, commented: "Horizon's 2015 second quarter and year-to-date results showed our continued ability to generate organic growth and solid returns across all four revenue streams - retail banking, business banking, mortgage banking and wealth management. Previous investments in people, resources and market expansion, coupled with our strategic partnership through the Peoples Bancorp acquisition, has created a strong foundation to continue our successful growth story in the future."

Mr. Dwight continued, "Horizon's net income of $4.7 million for the second quarter of 2015 was down from $5.4 million in the previous quarter and $4.8 million in the same period of 2014. An increase in the provision for loan losses due to a $1.3 million commercial loan charge-off was the primary reason for this decline. However, pre-tax, pre-provision income for the second quarter of 2015 increased 19.7% from the same period in 2014 and 6.4% from the previous quarter. This increase in pre-tax, pre-provision income demonstrates the earnings power garnered from our organic and strategic growth strategy."

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

Non-GAAP Reconciliation of Net Income

2015   2014   2015   2014
Net income as reported $ 4,728 $ 4,778 $ 10,086 $ 8,195
Merger expenses 570 900 716 1,211
Tax effect   (132 )     (315 )     (183 )     (424 )
Net income excluding merger expenses 5,166 5,363 10,619 8,982
 
Gain on sale of investment securities - - (124 ) -
Tax effect   -       -       43       -  
Net income excluding gain on sale of investment securities 5,166 5,363 10,538 8,982
 
Death benefit on bank owned life insurance ("BOLI") - - (145 ) -
Tax effect   -       -       51       -  
Net income excluding death benefit on BOLI 5,166 5,363 10,444 8,982
 
Acquisition-related purchase accounting adjustments ("PAUs") (797 ) (1,199 ) (1,880 ) (1,588 )
Tax effect   279       420       658       556  
Net income excluding PAUs $ 4,648     $ 4,584     $ 9,222     $ 7,950  
 

Non-GAAP Reconciliation of Diluted Earnings per Share

Diluted earnings per share as reported $ 0.49 $ 0.50 $ 1.04 $ 0.88
Merger expenses 0.06 0.09 0.07 0.13
Tax effect   (0.01 )     (0.03 )     (0.02 )     (0.05 )
Diluted earnings per share excluding merger expenses 0.53 0.56 1.10 0.96
 
Gain on sale of investment securities - - (0.01 ) -
Tax effect   -       -       0.00       -  
Net income excluding gain on sale of investment securities 0.53 0.56 1.09 0.96
 
Death benefit on BOLI - - (0.02 ) -
Tax effect   -       -       0.01       -  
Net income excluding death benefit on BOLI 0.53 0.56 1.08 0.96
 
Acquisition-related PAUs (0.08 ) (0.13 ) (0.20 ) (0.17 )
Tax effect   0.03       0.04       0.07       0.06  
Diluted earnings per share excluding PAUs $ 0.48     $ 0.48     $ 0.95     $ 0.85  
 
Non-GAAP Reconciliation of Pre-tax, Pre-Provision Income
(Dollar in Thousands, Unaudited)
         
Three Months Ended Six Months Ended
June 30 March 31 June 30 June 30
2015   2015   2014   2015   2014
Net income as reported $ 4,728 $ 5,358 $ 4,778 $ 10,086 $ 8,195
Income tax expense 1,752 1,912 1,890 3,664 2,753
Provision for loan losses   1,906     614     339     2,520     339
Pre-tax, pre-provision income $ 8,386   $ 7,884   $ 7,007   $ 16,270   $ 11,287
 
Loan Growth by Type
Three Months Ended June 30, 2015
(Dollars in Thousands, Unaudited)
          Annualized
June 30 March 31 Amount Percent Percent
2015   2015   Change   Change   Change
Commercial loans $ 709,946 $ 695,736 $ 14,210 2.0% 8.2%
Residential mortgage loans 277,407 260,390 17,017 6.5% 26.2%
Consumer loans 336,006 326,334 9,672 3.0% 11.9%
Held for sale loans   7,677     6,229     1,448 23.2% 93.2%
Subtotal 1,331,036 1,288,689 42,347 3.3% 13.2%
Mortgage warehouse loans   195,924     178,899     17,025 9.5% 38.2%
Total loans $ 1,526,960   $ 1,467,588   $ 59,372 4.0% 16.2%
 
Loan Growth by Type
Six Months Ended June 30, 2015
(Dollars in Thousands)
Annualized
June 30 December 31 Amount Percent Percent
2015   2014   Change   Change   Change
(Unaudited)                
Commercial loans $ 709,946 $ 674,314 $ 35,632 5.3% 10.7%
Residential mortgage loans 277,407 254,625 22,782 8.9% 18.0%
Consumer loans 336,006 320,459 15,547 4.9% 9.8%
Held for sale loans   7,677     6,143     1,534 25.0% 50.4%
Subtotal 1,331,036 1,255,541 75,495 6.0% 12.1%
Mortgage warehouse loans   195,924     129,156     66,768 51.7% 104.2%
Total loans $ 1,526,960   $ 1,384,697   $ 142,263 10.3% 20.7%
 

"Once again, our continued loan growth in the second quarter was critical in combatting persistent margin pressure," Mr. Dwight commented. "Horizon's core net interest margin, excluding income from acquisition-related purchase accounting adjustments, increased 4 basis points from the linked quarter and 5 basis points in the first six months of 2015 compared to the same period of 2014."

 
Non-GAAP Reconciliation of Net Interest Margin
(Dollar Amounts in Thousands, Unaudited)
   
Three Months Ended Six Months Ended
June 30   March 31   June 30 June 30

Net Interest Margin As Reported

2015   2015   2014   2015   2014
Net interest income $ 17,850 $ 16,886 $ 16,788 $ 34,736   $ 30,060
Average interest-earning assets 2,008,191 1,899,870 1,832,576 1,954,287 1,715,939
Net interest income as a percent of average interest-
earning assets ("Net Interest Margin") 3.67 % 3.70 % 3.78 % 3.68 % 3.62 %
 

Impact of Acquisitions

Interest income from acquisition-related PAUs $ (797 ) $ (1,083 ) $ (1,199 ) $ (1,880 ) $ (1,588 )
 

Excluding Impact of Acquisitions

Net interest income $ 17,053 $ 15,803 $ 15,589 $ 32,856 $ 28,472
Average interest-earning assets 2,008,191 1,899,870 1,832,576 1,954,287 1,715,939
Core Net Interest Margin 3.51 % 3.47 % 3.51 % 3.49 % 3.44 %
 

With respect to the increase in the provision for loan losses for the three and six-month periods ending June 30, 2015 compared to the same periods of the previous year, Mr. Dwight stated, "This increase reflects loan growth as well as a $1.3 million commercial loan charge-off during the second quarter related to a legacy workout credit which recently became impaired. Non-performing loans increased $609,000 compared to December 31, 2014; however, non-performing loans to total loans was down 11 basis points to 1.51% as of June 30, 2015. The increase in non-performing loans reflects our continued loan growth as credit conditions remain stable across the portfolio."

Horizon's loan loss reserve ratio, excluding loans with credit-related purchase accounting adjustments, was 1.15% as of June 30, 2015.

 
Allowance for Loan and Lease Loss Detail
As of June 30, 2015
(Dollars in Thousands, Unaudited)
       
Horizon
Legacy   Heartland   Summit   Total
Pre-discount loan balance $ 1,403,809 $ 31,777 $ 88,908 $ 1,524,494
 
Allowance for loan losses (ALLL) 16,138 276 7 16,421
Loan discount   N/A     1,903     3,308     5,211
ALLL+loan discount 16,138 2,179 3,315 21,632
             
Loans, net $ 1,387,671   $ 29,598   $ 85,593   $ 1,502,862
 
ALLL/ pre-discount loan balance 1.15% 0.87% 0.01% 1.08%
Loan discount/ pre-discount loan balance N/A 5.99% 3.72% 0.34%
ALLL+loan discount/ pre-discount loan balance 1.15% 6.86% 3.73% 1.42%
 

On July 1, 2015, Horizon completed its acquisition of Peoples Bancorp and its wholly-owned subsidiary, Peoples Federal Savings Bank of DeKalb County (collectively, "Peoples"). Dwight noted, "Peoples fits well into Horizon's strategic plan to expand in the states of Indiana and Michigan by expanding our footprint further into northeast Indiana and southwest Michigan. The integration process is well under way, and we are thrilled to have this talented and dedicated group of individuals join our growing organization. We look forward to bringing the Peoples' customer base an expanded product and service suite with a continued focus on community banking and participation."

Income Statement Highlights

Net income for the second quarter of 2015 was $4.7 million or $.49 diluted earnings per share compared to $4.8 million or $.50 diluted earnings per share in the second quarter of 2014. The decrease in net income and earnings per share from the previous year reflects an increase in the provision for loan losses of $1.6 million primarily due to one commercial loan charge-off of $1.3 million, and an increase in non-interest expenses of $242,000 primarily due to an increase in salaries and employee benefits, professional fees and loan expense. Excluding acquisition-related expenses and purchase accounting adjustments, net income for the second quarter of 2015 was $4.6 million or $.48 diluted earnings per share compared to $4.6 million or $.48 diluted earnings per share in the second quarter of 2014.

Net income for the six months ended June 30, 2015 was $10.1 million or $1.04 diluted earnings per share compared to $8.2 million or $.88 diluted earnings per share for the six months ended June 30, 2014. The increase in net income from the previous year reflects an increase in net interest income of $4.7 million or 15.6% and an increase in non-interest income of $2.1 million or 17.3%, partially offset by an increase in provision for loan losses of $2.2 million, an increase in non-interest expenses of $1.8 million and an increase in income tax expense of $911,000. 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 six months of 2015 was $9.2 million or $.95 diluted earnings per share compared to $8.0 million or $.85 diluted earnings per share in the same period of 2014.

Horizon's net interest margin was 3.67% during the second quarter of 2015, down from 3.70% for the prior quarter and 3.78% 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 purchase accounting adjustments related to the 2012 Heartland Bancshares, Inc. and the 2014 SCB Bancorp, Inc. acquisitions, the margin would have been 3.51% for the second quarter of 2015 compared to 3.47% for the prior quarter and 3.51% for the same period of 2014. Interest income from acquisition-related purchase accounting adjustments was $797,000, $1.1 million, and $1.2 million for the three months ended June 30, 2015, March 31, 2015 and June 30, 2014, respectively.

Horizon's net interest margin was 3.68% for the six months ending June 30, 2015, up from 3.62% for same period of 2014. Excluding interest income from acquisition-related purchase accounting adjustments, the margin would have been 3.49% for the six months ending June 30, 2015 compared to 3.44% for same period of 2014. Interest income from acquisition-related purchase accounting adjustments was $1.9 million and $1.6 million for the six months ended June 30, 2015 and June 30, 2014, respectively.

Residential mortgage lending activity during the second quarter of 2015 generated $2.6 million in income from the gain on sale of mortgage loans, an increase of $105,000 from the same period of 2014. Total origination volume in the second quarter of 2015, including loans placed into portfolio, totaled $114.4 million, representing an increase of 38.8% from the same period of 2014 of $82.4 million. Purchase money mortgage originations during the second quarter of 2015 represented 71.8% of total originations compared to 50.2% of originations during the previous quarter and 77.5% during the second quarter of 2014.

Lending Activity

Total loans increased $142.3 million from $1.4 billion as of December 31, 2014 to $1.5 billion as of June 30, 2015 as mortgage warehouse loans increased by $66.8 million, residential mortgage loans increased by $22.8 million and consumer loans increased by $15.5 million. Commercial loans increased $35.6 million or 10.7% on an annualized basis from $674.3 million at December 31, 2014 to $709.9 million at June 30, 2015.

Total loan balances in the Kalamazoo and Indianapolis markets continued to grow during the second quarter of 2015 to $154.4 million and $145.4 million, respectively, as of June 30, 2015. Kalamazoo's aggregate loan balances increased $8.6 million or 5.9%, and Indianapolis' aggregate loan balances increased $12.6 million or 9.4%. Combined, these markets contributed $21.2 million in loan growth during the second quarter of 2015 or 7.6%.

The provision for loan losses was $1.9 million for the second quarter and $2.5 million for the first six months of 2015, which was $1.6 million and $2.2 million higher than the provision for the second quarter and first six months of 2014, respectively. The higher provision for loan losses in the second quarter and for the first six months of 2015 compared to the same periods of 2014 was due to the charge-off of one commercial credit of $1.3 million as well as continued loan growth. The $1.3 million commercial charge-off was a legacy workout loan that was recently 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 1.08% as of June 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 $16.4 million as of June 30, 2015. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 1.15% as of June 30, 2015.

Non-performing loans totaled $23.1 million as of June 30, 2015 and $22.4 million as of December 31, 2014. Compared to December 31, 2014, non-performing commercial loans increased by $1.5 million and non-performing real estate and consumer loans decreased by $75,000 and $845,000, respectively. As a percentage of total loans, non-performing loans were 1.51% at June 30, 2015, down 11 basis points from 1.62% at December 31, 2014.

Expense Management

Total non-interest expense was $242,000 higher in the second quarter of 2015 compared to the same period of 2014. The increase was primarily due to an increase in salaries and employee benefits, professional fees and loan expense related to overall company growth.

Total non-interest expense was $1.8 million higher in the first six months of 2015 compared to the same period of 2014. The increase in non-interest expense was primarily related to an increase in salaries and employee benefits costs of $1.1 million and net occupancy expenses of $142,000 due to overall company growth as well as the Summit acquisition. The increase was also due to an increase in professional fees, loan expense, FDIC insurance expense and other expense due to overall company growth. The increase was partially offset by a decrease in outside services and consultants of $415,000 due to the expense associated with the Summit acquisition in the second quarter of 2014.

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)
 
  June 30   March 31   December 31   September 30   June 30
2015   2015   2014   2014   2014
Balance sheet:
Total assets $ 2,219,307 $ 2,153,965 $ 2,076,922 $ 2,037,045 $ 2,073,251
Investment securities 493,631 495,315 489,531 495,941 537,618
Commercial loans 709,946 695,736 674,314 677,349 648,202
Mortgage warehouse loans 195,924 178,899 129,156 105,133 140,896
Residential mortgage loans 277,407 260,390 254,625 251,739 235,523
Consumer loans 336,006 326,334 320,459 308,800 296,873
Earning assets 2,031,671 1,974,251 1,885,576 1,860,041 1,882,724
Non-interest bearing deposit accounts 307,215 285,181 267,667 278,527 270,023
Interest bearing transaction accounts 983,912 905,216 930,582 881,299 919,024
Time deposits 293,596 274,699 284,070 289,837 310,056
Borrowings 385,236 440,415 351,198 350,113 340,201
Subordinated debentures 32,719 32,680 32,642 32,603 32,564
Common stockholders' equity 189,631 186,991 181,914 177,280 174,836
Total stockholders' equity 202,131 199,491 194,414 189,780 187,336
 
Income statement: Three months ended
Net interest income $ 17,850 $ 16,886 $ 16,523 $ 16,400 $ 16,788
Provision for loan losses 1,906 614 978 1,741 339
Non-interest income 7,186 7,066 6,738 7,390 6,627
Non-interest expenses 16,650 16,068 15,671 15,353 16,408
Income tax expense   1,752       1,912       1,664       1,738       1,890  
Net income 4,728 5,358 4,948 4,958 4,778
Preferred stock dividend   (31 )     (31 )     (31 )     (40 )     (32 )
Net income available to common shareholders $ 4,697     $ 5,327     $ 4,917     $ 4,918     $ 4,746  
 
Per share data:
Basic earnings per share $ 0.51 $ 0.58 $ 0.53 $ 0.53 $ 0.52
Diluted earnings per share 0.49 0.55 0.51 0.51 0.50
Cash dividends declared per common share 0.14 0.14 0.14 0.13 0.13
Book value per common share 20.49 20.25 19.75 19.25 19.00
Tangible book value per common share 17.06 16.80 16.26 15.75 15.47
Market value - high 26.03 25.86 26.73 23.67 22.58
Market value - low $ 22.85 $ 22.38 $ 22.83 $ 20.65 $ 19.57
Weighted average shares outstanding - Basic 9,240,005 9,216,011 9,212,156 9,208,707 9,182,986
Weighted average shares outstanding - Diluted 9,637,586 9,609,506 9,628,240 9,588,332 9,560,939
 
Key ratios:
Return on average assets 0.87 % 1.05 % 0.96 % 0.96 % 0.97 %
Return on average common stockholders' equity 9.88 11.66 10.72 10.95 11.82
Net interest margin 3.67 3.70 3.64 3.59 3.78
Loan loss reserve to total loans 1.08 1.13 1.19 1.20 1.18
Non-performing loans to loans 1.51 1.52 1.62 1.47 1.41
Average equity to average assets 9.32 9.56 9.56 9.33 8.79
Bank only capital ratios:
Tier 1 capital to average assets 8.18 8.75 8.80 8.63 8.78
Tier 1 capital to risk weighted assets 11.04 11.47 11.96 12.13 11.47
Total capital to risk weighted assets 12.08 12.54 13.08 13.26 12.53
 
Loan data:
Substandard loans $ 28,220 $ 27,355 $ 27,661 $ 35,023 $ 35,495
30 to 89 days delinquent 3,326 3,945 5,082 3,310 3,671
 
90 days and greater delinquent - accruing interest $ 207 $ 19 $ 115 $ 62 $ 42
Trouble debt restructures - accruing interest 3,271 4,368 4,372 5,838 5,614
Trouble debt restructures - non-accrual 4,523 4,711 2,643 3,061 3,178
Non-accrual loans   15,050       13,282       15,312       10,828       9,844  
Total non-performing loans $ 23,051     $ 22,380     $ 22,442     $ 19,789     $ 18,678  
 
HORIZON BANCORP
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
 
  June 30   June 30
2015   2014
Balance sheet:
Total assets $ 2,219,307 $ 2,073,251
Investment securities 493,631 537,618
Commercial loans 709,946 648,202
Mortgage warehouse loans 195,924 140,896
Residential mortgage loans 277,407 235,523
Consumer loans 336,006 296,873
Earning assets 2,031,671 1,882,724
Non-interest bearing deposit accounts 307,215 270,023
Interest bearing transaction accounts 983,912 919,024
Time deposits 293,596 310,056
Borrowings 385,236 340,201
Subordinated debentures 32,719 32,564
Common stockholders' equity 189,631 174,836
Total stockholders' equity 202,131 187,336
 
Income statement: Six Months Ended
Net interest income $ 34,736 $ 30,060
Provision for loan losses 2,520 339
Non-interest income 14,252 12,149
Non-interest expenses 32,718 30,922
Income tax expense   3,664       2,753  
Net income 10,086 8,195
Preferred stock dividend   (63 )     (63 )
Net income available to common shareholders $ 10,023     $ 8,132  
 
Per share data:
Basic earnings per share $ 1.09 $ 0.91
Diluted earnings per share 1.04 0.88
Cash dividends declared per common share 0.28 0.24
Book value per common share 20.49 19.00
Tangible book value per common share 17.06 15.47
Market value - high 26.14 24.91
Market value - low $ 22.38 $ 19.57
Weighted average shares outstanding - Basic 9,228,075 8,908,492
Weighted average shares outstanding - Diluted 9,615,551 9,293,423
 
Key ratios:
Return on average assets 0.96 % 0.89 %
Return on average common stockholders' equity 10.73 10.40
Net interest margin 3.68 3.62
Loan loss reserve to total loans 1.08 1.18
Non-performing loans to loans 1.51 1.41
Average equity to average assets 9.45 9.20
Bank only capital ratios:
Tier 1 capital to average assets 8.18 8.82
Tier 1 capital to risk weighted assets 11.04 11.48
Total capital to risk weighted assets 12.08 12.54
 
Loan data:
Substandard loans $ 28,220 $ 35,495
30 to 89 days delinquent 3,326 3,671
 
90 days and greater delinquent - accruing interest $ 207 $ 42
Trouble debt restructures - accruing interest 3,271 5,614
Trouble debt restructures - non-accrual 4,523 3,178
Non-accrual loans   15,050       9,844  
Total non-performing loans $ 23,051     $ 18,678  
 
HORIZON BANCORP
 
Allocation of the Allowance for Loan and Lease Losses

(Dollars in Thousands, Unaudited)

         
June 30 March 31 December 31 September 30 June 30
2015   2015   2014   2014   2014
Commercial $ 8,386 $ 7,876 $ 7,910 $ 7,515 $ 6,958
Real estate 3,044 3,281 2,508 3,304 2,367
Mortgage warehousing 1,319 1,272 1,132 1,300 1,559
Consumer   3,672     4,205     4,951     4,041     4,776
Total $ 16,421   $ 16,634   $ 16,501   $ 16,160   $ 15,660
 

Net Charge-offs (Recoveries)

(Dollars in Thousands, Unaudited)

 
Three months ended
June 30 March 31 December 31 September 30 June 30
2015   2015   2014   2014   2014
Commercial $ 1,584 $ (11) $ 199 $ 1,006 $ 185
Real estate 160 20 101 19 169
Mortgage warehousing - - - - -
Consumer   375     472     336     217     426
Total $ 2,119   $ 481   $ 636   $ 1,242   $ 780
 

Total Non-performing Loans

(Dollars in Thousands, Unaudited)

 
June 30 March 31 December 31 September 30 June 30
2015   2015   2014   2014   2014
Commercial $ 13,384 $ 11,540 $ 11,855 $ 9,323 $ 8,243
Real estate 5,819 6,062 5,894 6,312 6,672
Mortgage warehousing - - - - -
Consumer   3,848     4,778     4,693     4,154     3,763
Total $ 23,051   $ 22,380   $ 22,442   $ 19,789   $ 18,678
 

Other Real Estate Owned and Repossessed Assets

(Dollars in Thousands, Unaudited)

 
June 30 March 31 December 31 September 30 June 30
2015   2015   2014   2014   2014
Commercial $ 376 $ 307 $ 411 $ 376 $ 452
Real estate 58 219 636 875 752
Mortgage warehousing - - - - -
Consumer   37     223     154     3     23
Total $ 471   $ 749   $ 1,201   $ 1,254   $ 1,227
 
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)

 
    Three Months Ended   Three Months Ended
June 30, 2015 June 30, 2014
Average     Average Average     Average
Balance   Interest   Rate Balance   Interest   Rate
 
ASSETS
Interest-earning assets
Federal funds sold $ 3,597 $ 2 0.22 % $ 9,062 $ 5 0.22 %
Interest-earning deposits 8,608 5 0.23 % 7,987 4 0.20 %
Investment securities - taxable 363,919 2,060 2.27 % 403,910 2,386 2.37 %
Investment securities - non-taxable (1) 141,784 1,079 4.24 % 145,591 1,096 4.25 %
Loans receivable (2)(3)   1,490,283       17,981 4.87 %   1,266,026       16,631 5.27 %
Total interest-earning assets (1) 2,008,191 21,127 4.33 % 1,832,576 20,122 4.51 %
 
Non-interest-earning assets
Cash and due from banks 31,783 28,106
Allowance for loan losses (16,756 ) (15,808 )
Other assets   157,795     129,608  
 
$ 2,181,013   $ 1,974,482  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 1,255,123 $ 1,237 0.40 % $ 1,229,025 $ 1,355 0.44 %
Borrowings 381,782 1,539 1.62 % 273,968 1,478 2.16 %
Subordinated debentures   32,699       501 6.15 %   32,541       501 6.18 %
Total interest-bearing liabilities 1,669,604 3,277 0.79 % 1,535,534 3,334 0.87 %
 
Non-interest-bearing liabilities
Demand deposits 294,425 253,093
Accrued interest payable and
other liabilities 13,770 12,245
Shareholders' equity   203,214     173,610  
 
$ 2,181,013   $ 1,974,482  
 
Net interest income/spread $ 17,850 3.54 % $ 16,788 3.63 %
 
Net interest income as a percent
of average interest earning assets (1) 3.67 % 3.78 %
(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)

 
    Six Months Ended   Six Months Ended
June 30, 2015 June 30, 2014
Average     Average Average     Average
Balance   Interest   Rate Balance   Interest   Rate
ASSETS
Interest-earning assets
Federal funds sold $ 4,198 $ 11 0.53 % $ 7,842 $ 9 0.23 %
Interest-earning deposits 9,684 10 0.21 % 6,855 7 0.21 %
Investment securities - taxable 362,250 4,200 2.34 % 395,406 4,769 2.43 %
Investment securities - non-taxable (1) 141,269 2,156 4.27 % 146,709 2,219 4.07 %
Loans receivable (2)(3)   1,436,886       34,843 4.90 %   1,159,127       29,585 5.15 %
Total interest-earning assets (1) 1,954,287 41,220 4.35 % 1,715,939 36,589 4.39 %
 
Non-interest-earning assets
Cash and due from banks 30,396 26,507
Allowance for loan losses (16,623 ) (15,987 )
Other assets   157,669     133,408  
 
$ 2,125,729   $ 1,859,867  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 1,235,601 $ 2,469 0.40 % $ 1,154,682 $ 2,632 0.46 %
Borrowings 359,436 3,018 1.69 % 250,761 2,900 2.33 %
Subordinated debentures   32,678       997 6.15 %   32,522       997 6.18 %
Total interest-bearing liabilities 1,627,715 6,484 0.80 % 1,437,965 6,529 0.92 %
 
Non-interest-bearing liabilities
Demand deposits 282,796 238,579
Accrued interest payable and
other liabilities 14,374 12,191
Shareholders' equity   200,844     171,132  
 
$ 2,125,729   $ 1,859,867  
 
Net interest income/spread $ 34,736 3.55 % $ 30,060 3.47 %
 
Net interest income as a percent
of average interest earning assets (1) 3.68 % 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)

 
  June 30   December 31
2015   2014
(Unaudited)    
Assets
Cash and due from banks $ 43,857 $ 43,476
Investment securities, available for sale 330,970 323,764
Investment securities, held to maturity (fair value of $167,581 and $169,904) 162,661 165,767
Loans held for sale 7,677 6,143
Loans, net of allowance for loan losses of $16,421 and $16,501 1,502,862 1,362,053
Premises and equipment, net 54,778 52,461
Federal Reserve and Federal Home Loan Bank stock 11,080 11,348
Goodwill 28,176 28,176
Other intangible assets 3,531 3,965
Interest receivable 8,823 8,246
Cash value of life insurance 39,897 39,382
Other assets   24,995     32,141
Total assets $ 2,219,307   $ 2,076,922
Liabilities
Deposits
Non-interest bearing $ 307,215 $ 267,667
Interest bearing   1,277,508     1,214,652
Total deposits 1,584,723 1,482,319
Borrowings 385,236 351,198
Subordinated debentures 32,719 32,642
Interest payable 461 497
Other liabilities   14,037     15,852
Total liabilities   2,017,176     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, 9,313,779 and 9,278,916 shares
Outstanding, 9,256,026 and 9,213,036 shares - -
Additional paid-in capital 46,622 45,916
Retained earnings 141,889 134,477
Accumulated other comprehensive income   1,120     1,521
Total stockholders' equity   202,131     194,414
Total liabilities and stockholders' equity $ 2,219,307   $ 2,076,922
 
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Statements of Income

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

 
  Three Months Ended   Six Months Ended
June 30   June 30
2015   2014   2015   2014
Interest Income    
Loans receivable $ 17,981 $ 16,631 $ 34,843 $ 29,585
Investment securities
Taxable 2,067 2,395 4,221 4,785
Tax exempt   1,079       1,096       2,156       2,219  
Total interest income   21,127       20,122       41,220       36,589  
Interest Expense
Deposits 1,237 1,355 2,469 2,632
Borrowed funds 1,539 1,478 3,018 2,900
Subordinated debentures   501       501       997       997  
Total interest expense   3,277       3,334       6,484       6,529  
Net Interest Income 17,850 16,788 34,736 30,060
Provision for loan losses   1,906       339       2,520       339  
Net Interest Income after Provision for Loan Losses   15,944       16,449       32,216       29,721  
Non-interest Income
Service charges on deposit accounts 1,085 1,038 2,084 1,961
Wire transfer fees 182 145 333 257
Interchange fees 1,366 1,254 2,468 2,213
Fiduciary activities 1,216 1,199 2,513 2,247
Gain on sale of investment securities (includes $0 for the three months

ended and $124 for the six months ended June 30, 2015 and $0

for the three and six months ended June 30, 2014, related to
accumulated other comprehensive earnings reclassifications) - - 124 -
Gain on sale of mortgage loans 2,642 2,537 5,021 3,948
Mortgage servicing income net of impairment 300 233 479 440
Increase in cash value of bank owned life insurance 257 252 515 485
Death benefit on bank owned life insurance - - 145 -
Other income   138       (31 )     570       598  
Total non-interest income   7,186       6,627       14,252       12,149  
Non-interest Expense
Salaries and employee benefits 8,385 8,293 16,889 15,776
Net occupancy expenses 1,375 1,360 2,926 2,784
Data processing 966 937 1,889 1,807
Professional fees 660 419 1,187 1,027
Outside services and consultants 918 1,298 1,544 1,959
Loan expense 1,367 1,272 2,624 2,287
FDIC insurance expense 339 285 676 541
Other losses 150 95 105 133
Other expense   2,490       2,449       4,878       4,608  
Total non-interest expense   16,650       16,408       32,718       30,922  
Income Before Income Tax 6,480 6,668 13,750 10,948
Income tax expense (includes $0 for the three months ended and $43 for
the six months ended June 30, 2015 and $0 for the three and six
months ended June 30, 2014, related to income tax expense from
reclassification items)   1,752       1,890       3,664       2,753  
Net Income 4,728 4,778 10,086 8,195
Preferred stock dividend   (31 )     (32 )     (63 )     (63 )
Net Income Available to Common Shareholders $ 4,697     $ 4,746     $ 10,023     $ 8,132  
Basic Earnings Per Share $ 0.51 $ 0.52 $ 1.09 $ 0.91
Diluted Earnings Per Share 0.49 0.50 1.04 0.88
 

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

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