Market Overview

Horizon Bancorp Announces Record Quarterly and Six-Month Net Income

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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, 2016.

SUMMARY:

  • Net income for the second quarter of 2016 was $6.3 million or $.52 diluted earnings per share.
  • Excluding acquisition-related expenses and gain on sale of investment securities, net income for the second quarter of 2016 increased 38.9% compared to the same period of 2015 to $7.2 million or $.59 diluted earnings per share.
  • Net income for the first six months of 2016 was $11.7 million or $.96 diluted earnings per share.
  • Excluding acquisition-related expenses, gain on sale of investment securities and the death benefit on bank owned life insurance, net income for the first six months of 2016 increased 24.1% compared to the same period of 2015 to $13.0 million or $1.07 diluted earnings per share.
  • Total loans, excluding mortgage warehouse loans, increased 8.1% on an annualized basis during the second quarter of 2016.
  • Net interest income for the first six months of 2016 increased 17.0% or $5.9 million compared to the same period in 2015.
  • Net interest margin, excluding the impact of acquisitions ("core net interest margin"), was 3.42% for the second quarter of 2016 compared to 3.36% for the prior quarter and 3.51% for the same period in 2015.
  • Non-interest income for the first six months of 2016 increased 24.4% or $3.5 million compared to the same period in 2015.
  • Horizon's tangible book value per share rose to $17.17 at June 30, 2016, compared to $16.53 at December 31, 2015 and $17.06 at June 30, 2015.
  • Horizon entered Fort Wayne, Indiana in the second quarter of 2016 by establishing a loan production team that will focus on commercial lending in Indiana's second largest city.
  • On June 1, 2016, Horizon closed the acquisition of Kosciusko Financial, Inc. ("Kosciusko") and its wholly-owned subsidiary, Farmers State Bank, headquartered in Mentone, Indiana.
  • On July 18, 2016, Horizon closed the acquisition of LaPorte Bancorp, Inc. ("LaPorte Bancorp") and its wholly-owned subsidiary, The LaPorte Savings Bank, headquartered in La Porte, Indiana. LaPorte Bancorp's results are not included in Horizon's June 30, 2016 financial results.
  • On July 12, 2016, Horizon announced the pending acquisition of CNB Bancorp and its wholly-owned subsidiary, The Central National Bank and Trust Company, headquartered in Attica, Indiana.

Craig Dwight, Chairman and CEO, commented: "Horizon's 2016 second quarter and year-to-date earnings illustrate, once again, our balanced and diversified revenue streams producing strong results. Core net income, excluding acquisition-related expenses, gain on sale of investment securities and the death benefit on bank owned life insurance, was $7.2 million for the second quarter and $13.0 million for the first six months of 2016. The increase in core net income translated to solid growth in Horizon's core diluted earnings per share for both the second quarter and the first six months of 2016 compared to 2015."

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

Non-GAAP Reconciliation of Net Income

2016   2015   2016   2015
Net income as reported $ 6,326 $ 4,728 $ 11,707 $ 10,086
Merger expenses 1,881 570 2,520 716
Tax effect   (531 )     (132 )     (696 )     (183 )
Net income excluding merger expenses 7,676 5,166 13,531 10,619
 
Gain on sale of investment securities (767 ) - (875 ) (124 )
Tax effect   268       -       306       43  
Net income excluding gain on sale of investment securities 7,177 5,166 12,962 10,538
 
Death benefit on bank owned life insurance ("BOLI") - - - (145 )
Tax effect   -       -       -       51  
Net income excluding death benefit on BOLI   7,177       5,166       12,962       10,444  
 
Acquisition-related purchase accounting adjustments ("PAUs") (397 ) (797 ) (944 ) (1,880 )
Tax effect   139       279       330       658  
Net income excluding PAUs $ 6,919     $ 4,648     $ 12,348     $ 9,222  
 

Non-GAAP Reconciliation of Diluted Earnings per Share

Diluted earnings per share as reported $ 0.52 $ 0.49 $ 0.96 $ 1.04
Merger expenses 0.15 0.06 0.21 0.07
Tax effect   (0.04 )     (0.01 )     (0.06 )     (0.02 )
Diluted earnings per share excluding merger expenses 0.63 0.54 1.11 1.09
 
Gain on sale of investment securities (0.06 ) - (0.07 ) (0.01 )
Tax effect   0.02       -       0.03       0.00  
Net income excluding gain on sale of investment securities 0.59 0.54 1.07 1.09
 
Death benefit on BOLI - - - (0.02 )
Tax effect   -       -       -       0.01  
Net income excluding death benefit on BOLI   0.59       0.54       1.07       1.08  
 
Acquisition-related PAUs (0.03 ) (0.08 ) (0.09 ) (0.20 )
Tax effect   0.01       0.03       0.03       0.07  
Diluted earnings per share excluding PAUs $ 0.57     $ 0.49     $ 1.01     $ 0.95  
 

Mr. Dwight continued, "The second quarter of 2016 was highlighted by strong contributions from our retail and mortgage warehouse operations, an increase in net interest margin over the linked quarter, fee income growth and continued improvement in asset quality. Additionally, Horizon continued to build-out our existing growth markets and entered Fort Wayne, Indiana with a loan production team that will focus on developing our commercial presence in Indiana's second largest city."

 
Loan Growth by Type, Excluding Acquired Loans
Three Months Ended June 30, 2016
(Dollars in Thousands, Unaudited)
            Excluding Acquired Loans
Acquired  
June 30 March 31 Amount Kosciusko Amount Percent
      2016   2016   Change   Loans   Change   Change
      (Unaudited)   (Unaudited)                
Commercial loans $ 874,580 $ 797,754 $ 76,826 $ (67,310 ) $ 9,516 1.2 %
Residential mortgage loans 493,626 442,806 50,820 (26,244 ) 24,576 5.6 %
Consumer loans   363,920     359,636     4,284       (6,319 )     (2,035 ) -0.6 %
Subtotal 1,732,126 1,600,196 131,930 (99,873 ) 32,057 2.0 %
Held for sale loans 7,812 3,168 4,644 - 4,644 146.6 %
Mortgage warehouse loans   205,699     119,876     85,823       -       85,823   71.6 %
Total loans $ 1,945,637   $ 1,723,240   $ 222,397     $ (99,873 )   $ 122,524   7.1 %
 
Loan Growth by Type, Excluding Acquired Loans
Six Months Ended June 30, 2016
(Dollars in Thousands)
Excluding Acquired Loans
Acquired
June 30 December 31 Amount Kosciusko Amount Percent
      2016   2015   Change   Loans   Change   Change
      (Unaudited)   (Unaudited)                
Commercial loans $ 874,580 $ 804,995 $ 69,585 $ (67,310 ) $ 2,275 0.3 %
Residential mortgage loans 493,626 437,144 56,482 (26,244 ) 30,238 6.9 %
Consumer loans   363,920     362,300     1,620       (6,319 )     (4,699 ) -1.3 %
Subtotal 1,732,126 1,604,439 127,687 (99,873 ) 27,814 1.7 %
Held for sale loans 7,812 7,917 (105 ) - (105 ) -1.3 %
Mortgage warehouse loans   205,699     144,692     61,007       -       61,007   42.2 %
Total loans $ 1,945,637   $ 1,757,048   $ 188,589     $ (99,873 )   $ 88,716   5.0 %
 

"An improved mix of higher yielding interest earning assets and low cost deposits and a $415,000 prepayment penalty received on an investment security during the second quarter of 2016 resulted in an increase in net interest margin from the prior quarter," Mr. Dwight commented. Horizon's core net interest margin, excluding income from acquisition-related purchase accounting adjustments, increased 6 basis points from the linked quarter to 3.42% and was down 9 basis points in the first six months of 2016 compared to the same period of 2015.

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

Net Interest Margin As Reported

2016   2016   2015   2016   2015
(Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Net interest income $ 20,869 $ 19,774 $ 17,850 $ 40,643   $ 34,736
Average interest-earning assets 2,471,354 2,367,250 2,008,191 2,406,468 1,954,287
Net interest income as a percent of average interest-
earning assets ("Net Interest Margin") 3.48 % 3.45 % 3.67 % 3.47 % 3.68 %
 

Impact of Acquisitions

Interest income from acquisition-related
purchase accounting adjustments $ (397 ) $ (547 ) $ (797 ) $ (944 ) $ (1,880 )
 

Excluding Impact of Acquisitions

Net interest income $ 20,472 $ 19,227 $ 17,053 $ 39,699 $ 32,856
Average interest-earning assets 2,471,354 2,367,250 2,008,191 2,406,468 1,954,287
Core Net Interest Margin 3.42 % 3.36 % 3.51 % 3.40 % 3.49 %
 

Dwight noted, "Asset quality continued to improve during the second quarter of 2016 as non-performing loans to total loans declined to 0.68% at June 30, 2016 from 0.95% at December 31, 2015. Total non-performing loans decreased $3.5 million during the first half of 2016, while commercial loans saw the largest improvement in non-performing loans to $4.3 million as of June 30, 2016, a decrease of $2.7 million from December 31, 2015." Horizon's loan loss reserve ratio, excluding loans with credit-related purchase accounting adjustments, was 0.89% as of June 30, 2016. Loan loss reserves and credit-related loan discounts on acquired loans as a percentage of total loans was 1.32% as of June 30, 2016.

 
Non- GAAP Allowance for Loan and Lease Loss Detail
As of June 30, 2016
(Dollars in Thousands, Unaudited)
             
Horizon
Legacy   Heartland   Summit   Peoples   Kosciusko   Total
Pre-discount loan balance $ 1,591,788 $ 19,346 $ 69,137 $ 169,224 $ 99,873 $ 1,949,368
 
Allowance for loan losses (ALLL) 14,226 - - - - 14,226
Loan discount   N/A       1,222       2,801       3,694       3,826       11,543  
ALLL+loan discount 14,226 1,222 2,801 3,694 3,826 25,769
                     
Loans, net $ 1,577,562     $ 18,124     $ 66,336     $ 165,530     $ 96,047     $ 1,923,599  
 
ALLL/ pre-discount loan balance 0.89 % 0.00 % 0.00 % 0.00 % 0.00 % 0.73 %
Loan discount/ pre-discount loan balance N/A 6.32 % 4.05 % 2.18 % 3.83 % 0.59 %
ALLL+loan discount/ pre-discount loan balance 0.89 % 6.32 % 4.05 % 2.18 % 3.83 % 1.32 %
 

Horizon completed the acquisitions of Kosciusko and LaPorte Bancorp on June 1, 2016 and July 18, 2016, respectively. On July 12, 2016, Horizon announced the signing of a definitive merger agreement with CNB Bancorp in Attica, Indiana, which is expected to be completed in the fourth quarter of 2016. Dwight concluded, "I could not be more pleased with the dedication and team work of all those involved in these mergers. Kosciusko fills the gap between Horizon's central and northeast Indiana locations and adds a seasoned banking team in the growth market of Warsaw, Indiana and Kosciusko County. The LaPorte Bancorp acquisition is an in-market merger that adds experience and depth to Horizon's team and cost saves through consolidation of branch office locations. The CNB Bancorp merger adds a seasoned banking team in Fountain County, Indiana and is a nice lead into the contiguous growth market of Lafayette, Indiana, home of Purdue University."

Income Statement Highlights

Net income for the second quarter of 2016 was $6.3 million or $.52 diluted earnings per share compared to $4.7 million or $.49 diluted earnings per share in the second quarter of 2015. The increase in net income and earnings per share from the previous year reflects an increase in net interest income and non-interest income of $3.0 million and $2.7 million, respectively, and a decrease in the provision for loan losses of $1.7 million, partially offset by increases in non-interest expense of $4.9 million, income tax expense of $873,000 and the diluted shares outstanding primarily due to the stock issued in the Peoples Bancorp ("Peoples") and Kosciusko acquisitions. Excluding acquisition-related expenses and purchase accounting adjustments and gain on sale of investment securities, net income for the second quarter of 2016 was $6.9 million or $.57 diluted earnings per share compared to $4.6 million or $.49 diluted earnings per share in the second quarter of 2015.

Net income for the six months ended June 30, 2016 was $11.7 million or $.96 diluted earnings per share compared to $10.1 million or $1.04 diluted earnings per share for the six months ended June 30, 2015. The increase in net income from the previous year reflects an increase in net interest income and non-interest income of $5.9 million and $3.5 million, respectively, and a decrease in the provision for loan losses of $1.8 million, partially offset by increases in non-interest expense of $8.6 million and income tax expense of $939,000. The decrease in diluted earnings per share compared to the same period of 2015 was due to an increase in the diluted shares outstanding primarily due to the stock issued in the Peoples and Kosciusko acquisitions. 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 2016 was $12.3 million or $1.01 diluted earnings per share compared to $9.2 million or $.95 diluted earnings per share in the same period of 2015.

Horizon's net interest margin was 3.48% during the second quarter of 2016, up from 3.45% for the prior quarter and down from 3.67% for same period of 2015. The increase in net interest margin compared to the prior quarter was the result of an improved mix of higher yielding assets and low cost deposits and a $415,000 prepayment penalty received on an investment security during the second quarter of 2016. The decrease in the net interest margin compared to the same period of 2015 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, partially offset by lower rates and a change in mix on interest-bearing liabilities. Excluding acquisition-related purchase accounting adjustments, the margin would have been 3.42% for the second quarter of 2016 compared to 3.36% for the prior quarter and 3.51% for the same period of 2015. Interest income from acquisition-related purchase accounting adjustments was $397,000, $547,000 and $797,000 for the three months ended June 30, 2016, March 31, 2016, and June 30 2015, respectively.

Horizon's net interest margin was 3.47% for the six months ending June 30, 2016, down from 3.68% for same period of 2015. Excluding interest income from acquisition-related purchase accounting adjustments, the margin would have been 3.40% for the six months ending June 30, 2016 compared to 3.49% for same period of 2015. Interest income from acquisition-related purchase accounting adjustments was $944,000 and $1.9 million for the six months ended June 30, 2016 and June 30, 2015, respectively.

Lending Activity

Total loans increased $188.6 million from $1.8 billion as of December 31, 2015 to $1.9 billion as of June 30, 2016 as commercial loans increased by $69.6 million, mortgage warehouse loans increased by $61.0 million, residential mortgage loans increased by $56.5 million and consumer loans increased by $1.6 million.

Residential mortgage lending activity during the second quarter of 2016 generated $3.5 million in income from the gain on sale of mortgage loans, an increase of $887,000 from the same period of 2015. Total origination volume in the second quarter of 2016, including loans placed into portfolio, totaled $132.9 million, representing an increase of 16.2% from the same period of 2015. Purchase money mortgage originations during the second quarter of 2016 represented 78.2% of total originations compared to 65.3% of originations during the previous quarter and 71.8% during the second quarter of 2015.

Loan balances in the Kalamazoo and Indianapolis markets totaled $175.0 million and $175.5 million, respectively, as of June 30, 2016. Combined, these markets contributed $13.4 million in loan growth during the second quarter of 2016 or 15.9% on an annualized basis.

The provision for loan losses was $232,000 for the second quarter and $764,000 for the first six months of 2016, which was $1.7 million and $1.8 million lower than the provision for the second quarter and first six months of 2015, respectively. The decrease in provision for loan losses in the second quarter and for the first six months of 2016 was due to lower charge-offs and a decrease in non-performing loans.

The ratio of the allowance for loan losses to total loans decreased to 0.73% as of June 30, 2016 from 0.83% as of December 31, 2015 due to an increase in total loans and a decrease in the allowance for loan losses from $14.5 million as of December 31, 2015 to $14.2 million as of June 30, 2016. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 0.89% as of June 30, 2016.

Non-performing loans totaled $13.2 million as of June 30, 2016 and $16.7 million as of December 31, 2015. Compared to December 31, 2015, non-performing commercial, real estate and consumer loans decreased by $2.7 million, $578,000 and $255,000, respectively. As a percentage of total loans, non-performing loans were 0.68% at June 30, 2016, down 27 basis points from 0.95% at December 31, 2015.

Expense Management

Total non-interest expense was $4.9 million higher in the second quarter of 2016 compared to the same period of 2015. The increase was primarily due to an increase in salaries, employee benefits, net occupancy expenses and other expense reflecting overall company growth. Non-interest expense for the second quarter of 2016 included $1.9 million of one-time merger-related expenses due to the Kosciusko and LaPorte Bancorp acquisitions compared to $570,000 in one-time merger-related expenses during the same period of 2015 due to the Peoples acquisition.

Total non-interest expense was $8.6 million higher in the first six months of 2016 compared to the same period of 2015. The increase in non-interest expense was due to an increase in salaries expense of $2.5 million, employee benefits of $1.1 million, net occupancy expenses of $911,000, data processing expense of $350,000, professional fees of $391,000, FDIC deposit insurance expense of $138,000, other losses of $298,000 and other expense of $1.3 million due to overall company growth. Non-interest expense for the first six months of 2016 included $2.5 million of one-time merger-related expenses due to the Kosciusko and LaPorte Bancorp acquisitions compared to $716,000 in one-time merger-related expenses in the same period of 2015 due to the Peoples acquisition.

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
2016   2016   2015   2015   2015
Balance sheet:
Total assets $ 2,918,080 $ 2,627,918 $ 2,652,401 $ 2,607,914 $ 2,219,307
Investment securities 628,935 642,767 632,611 617,860 493,631
Commercial loans 874,580 797,754 804,995 795,271 709,946
Mortgage warehouse loans 205,699 119,876 144,692 138,974 195,924
Residential mortgage loans 493,626 442,806 437,144 430,946 277,407
Consumer loans 363,920 359,636 362,300 361,298 336,006
Earning assets 2,591,208 2,379,830 2,403,482 2,363,755 2,031,671
Non-interest bearing deposit accounts 397,412 343,025 335,955 338,436 307,215
Interest bearing transaction accounts 1,213,659 1,118,617 1,177,651 1,164,787 983,912
Time deposits 471,190 416,837 366,547 409,852 293,596
Borrowings 492,883 430,507 449,347 373,901 385,236
Subordinated debentures 32,874 32,836 32,797 32,758 32,719
Common stockholders' equity 281,002 261,417 254,332 252,238 189,631
Total stockholders' equity 281,002 261,417 266,832 264,738 202,131
 
Income statement: Three months ended
Net interest income $ 20,869 $ 19,774 $ 20,222 $ 19,776 $ 17,850
Provision for loan losses 232 532 342 300 1,906
Non-interest income 9,869 7,864 7,750 8,400 7,186
Non-interest expenses 21,555 19,747 19,240 22,235 16,650
Income tax expense   2,625       1,978       2,215       1,353       1,752  
Net income 6,326 5,381 6,175 4,288 4,728
Preferred stock dividend   -       (42 )     (31 )     (31 )     (31 )
Net income available to common shareholders $ 6,326     $ 5,339     $ 6,144     $ 4,257     $ 4,697  
 
Per share data:
Basic earnings per share $ 0.52 $ 0.45 $ 0.51 $ 0.37 $ 0.51
Diluted earnings per share 0.52 0.44 0.51 0.36 0.49
Cash dividends declared per common share 0.15 0.15 0.15 0.15 0.14
Book value per common share 22.35 21.82 21.30 21.14 20.49
Tangible book value per common share 17.17 17.08 16.53 16.34 17.06
Market value - high 25.14 27.88 28.15 26.15 26.03
Market value - low $ 23.80 $ 23.11 $ 23.58 $ 22.60 $ 22.85
Weighted average shares outstanding - Basic 12,179,253 11,949,416 11,937,247 11,605,976 9,240,005
Weighted average shares outstanding - Diluted 12,242,778 12,008,484 12,013,743 11,893,254 9,637,586
 
Key ratios:
Return on average assets 0.94 % 0.83 % 0.94 % 0.67 % 0.87 %
Return on average common stockholders' equity 9.43 8.26 9.53 6.76 9.88
Net interest margin 3.48 3.45 3.50 3.51 3.67
Loan loss reserve to total loans 0.73 0.83 0.83 0.93 1.08
Non-performing loans to loans 0.68 0.87 0.95 1.21 1.51
Average equity to average assets 9.94 10.16 10.32 10.38 9.32
Bank only capital ratios:
Tier 1 capital to average assets 9.39 8.98 8.77 9.31 8.24
Tier 1 capital to risk weighted assets 12.51 12.33 11.80 12.30 10.76
Total capital to risk weighted assets 13.23 13.10 12.57 13.17 11.76
 
Loan data:
Substandard loans $ 28,629 $ 23,600 $ 25,127 $ 26,073 $ 28,220
30 to 89 days delinquent 2,887 2,149 5,011 4,868 3,326
 
90 days and greater delinquent - accruing interest $ 24 $ 1 $ 28 $ 100 $ 207
Trouble debt restructures - accruing interest 1,256 1,231 1,218 2,948 3,271
Trouble debt restructures - non-accrual 1,466 2,857 3,172 3,994 4,523
Non-accrual loans   10,426       10,895       12,262       13,956       15,050  
Total non-performing loans $ 13,172     $ 14,984     $ 16,680     $ 20,998     $ 23,051  
 
 

HORIZON BANCORP

Financial Highlights

(Dollars in thousands except share and per share data and ratios, Unaudited)

         
June 30 June 30
2016     2015
Balance sheet:
Total assets $ 2,918,080 $ 2,219,307
Investment securities 628,935 493,631
Commercial loans 874,580 709,946
Mortgage warehouse loans 205,699 195,924
Residential mortgage loans 493,626 277,407
Consumer loans 363,920 336,006
Earning assets 2,591,208 2,031,671
Non-interest bearing deposit accounts 397,412 307,215
Interest bearing transaction accounts 1,213,659 983,912
Time deposits 471,190 293,596
Borrowings 492,883 385,236
Subordinated debentures 32,874 32,719
Common stockholders' equity 281,002 189,631
Total stockholders' equity 281,002 202,131
 
Income statement: Six Months Ended
Net interest income $ 40,643 $ 34,736
Provision for loan losses 764 2,520
Non-interest income 17,733 14,252
Non-interest expenses 41,302 32,718
Income tax expense   4,603         3,664  
Net income 11,707 10,086
Preferred stock dividend   (42 )       (63 )
Net income available to common shareholders $ 11,665       $ 10,023  
 
Per share data:
Basic earnings per share $ 0.97 $ 1.09
Diluted earnings per share 0.96 1.04
Cash dividends declared per common share 0.30 0.28
Book value per common share 22.35 20.49
Tangible book value per common share 17.17 17.06
Market value - high 27.88 26.14
Market value - low $ 23.11 $ 22.38
Weighted average shares outstanding - Basic 12,064,335 9,228,075
Weighted average shares outstanding - Diluted 12,127,028 9,615,551
 
Key ratios:
Return on average assets 0.89 % 0.96 %
Return on average common stockholders' equity 9.26 10.73
Net interest margin 3.47 3.68
Loan loss reserve to total loans 0.73 1.08
Non-performing loans to loans 0.68 1.51
Average equity to average assets 10.05 9.45
Bank only capital ratios:
Tier 1 capital to average assets 9.39 8.18
Tier 1 capital to risk weighted assets 12.51 11.04
Total capital to risk weighted assets 13.23 12.08
 
Loan data:
Substandard loans $ 28,629 $ 28,220
30 to 89 days delinquent 2,887 3,326
 
90 days and greater delinquent - accruing interest $ 24 $ 207
Trouble debt restructures - accruing interest 1,256 3,271
Trouble debt restructures - non-accrual 1,466 4,523
Non-accrual loans   10,426         15,050  
Total non-performing loans $ 13,172       $ 23,051  
 
 

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
2016   2016   2015   2015   2015
Commercial $ 6,051 $ 6,460 $ 7,195 $ 8,842 $ 8,386
Real estate 2,102 1,794 2,476 2,297 3,044
Mortgage warehousing 1,080 1,014 1,007 1,015 1,319
Consumer   4,993     4,968     3,856     4,014     3,672
Total $ 14,226   $ 14,236   $ 14,534   $ 16,168   $ 16,421
 
 

Net Charge-offs (Recoveries)

(Dollars in Thousands, Unaudited)

     
Three months ended
June 30   March 31   December 31   September 30   June 30
2016   2016   2015   2015   2015
Commercial $ 101 $ 403 $ 1,595 $ 77 $ 1,583
Real estate (31 ) 83 (59 ) 96 161
Mortgage warehousing - - - - -
Consumer   172       344     440       380     375
Total $ 242     $ 830   $ 1,976     $ 553   $ 2,119
 
 

Total Non-performing Loans

(Dollars in Thousands, Unaudited)

             
June 30 March 31 December 31 September 30 June 30
2016   2016   2015   2015   2015
Commercial $ 4,330 $ 5,774 $ 7,005 $ 10,832 $ 13,384
Real estate 5,659 5,974 6,237 6,315 5,819
Mortgage warehousing - - - - -
Consumer   3,183     3,236     3,438     3,851     3,848
Total $ 13,172   $ 14,984   $ 16,680   $ 20,998   $ 23,051
 
 

Other Real Estate Owned and Repossessed Assets

(Dollars in Thousands, Unaudited)

             
June 30 March 31 December 31 September 30 June 30
2016   2016   2015   2015   2015
Commercial $ 542 $ 424 $ 161 $ 324 $ 376
Real estate 2,925 3,393 3,046 958 58
Mortgage warehousing - - - - -
Consumer   69     -     -     -     37
Total $ 3,536   $ 3,817   $ 3,207   $ 1,282   $ 471
 
 

HORIZON BANCORP AND SUBSIDIARIES

Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)

             
Three Months Ended Three Months Ended
June 30, 2016 June 30, 2015
Average     Average Average     Average
Balance   Interest   Rate Balance   Interest   Rate
 
ASSETS
Interest-earning assets
Federal funds sold $ 3,309 $ 4 0.49 % $ 3,597 $ 2 0.22 %
Interest-earning deposits 28,045 59 0.85 % 8,608 5 0.23 %
Investment securities - taxable 469,925 2,598 2.22 % 363,919 2,060 2.27 %
Investment securities - non-taxable (1) 182,886 1,195 3.70 % 141,784 1,079 4.24 %
Loans receivable (2)(3)   1,787,189       20,794 4.69 %   1,490,283       17,981 4.87 %
Total interest-earning assets (1) 2,471,354 24,650 4.10 % 2,008,191 21,127 4.33 %
 
Non-interest-earning assets
Cash and due from banks 35,435 31,783
Allowance for loan losses (14,350 ) (16,756 )
Other assets   223,258     157,795  
 
$ 2,715,697   $ 2,181,013  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 1,625,024 $ 1,557 0.39 % $ 1,255,123 $ 1,237 0.40 %
Borrowings 400,585 1,721 1.73 % 381,782 1,539 1.62 %
Subordinated debentures   32,854       503 6.16 %   32,699       501 6.15 %
Total interest-bearing liabilities 2,058,463 3,781 0.74 % 1,669,604 3,277 0.79 %
 
Non-interest-bearing liabilities
Demand deposits 364,822 294,425
Accrued interest payable and
other liabilities 22,574 13,770
Stockholders' equity   269,838     203,214  
 
$ 2,715,697   $ 2,181,013  
 
Net interest income/spread $ 20,869 3.36 % $ 17,850 3.54 %
 
Net interest income as a percent
of average interest earning assets (1) 3.48 % 3.67 %
(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, 2016 June 30, 2015
Average     Average Average     Average
Balance   Interest   Rate Balance   Interest   Rate
ASSETS
Interest-earning assets
Federal funds sold $ 2,853 $ 4 0.28 % $ 4,198 $ 11 0.53 %
Interest-earning deposits 24,300 109 0.90 % 9,684 10 0.21 %
Investment securities - taxable 464,209 5,092 2.21 % 362,250 4,200 2.34 %
Investment securities - non-taxable (1) 181,660 2,432 3.64 % 141,269 2,156 4.27 %
Loans receivable (2)(3)   1,733,446       40,541 4.71 %   1,436,886       34,843 4.90 %
Total interest-earning assets (1) 2,406,468 48,178 4.10 % 1,954,287 41,220 4.35 %
 
Non-interest-earning assets
Cash and due from banks 34,246 30,396
Allowance for loan losses (14,350 ) (16,623 )
Other assets   217,797     157,669  
 
$ 2,644,161   $ 2,125,729  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 1,571,579 $ 3,048 0.39 % $ 1,235,601 $ 2,469 0.40 %
Borrowings 401,594 3,480 1.74 % 359,436 3,018 1.69 %
Subordinated debentures   32,653       1,007 6.20 %   32,678       997 6.15 %
Total interest-bearing liabilities 2,005,826 7,535 0.76 % 1,627,715 6,484 0.80 %
 
Non-interest-bearing liabilities
Demand deposits 350,157 282,796
Accrued interest payable and
other liabilities 22,465 14,374
Stockholders' equity   265,713     200,844  
 
$ 2,644,161   $ 2,125,729  
 
Net interest income/spread $ 40,643 3.34 % $ 34,736 3.55 %
 
Net interest income as a percent
of average interest earning assets (1) 3.47 % 3.68 %
(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
2016     2015
(Unaudited)      
Assets
Cash and due from banks $ 109,224 $ 48,650
Investment securities, available for sale 455,239 444,982
Investment securities, held to maturity (fair value of $180,059 and $193,703) 173,696 187,629
Loans held for sale 7,812 7,917
Loans, net of allowance for loan losses of $14,226 and $14,534 1,923,599 1,734,597
Premises and equipment, net 61,186 60,798
Federal Reserve and Federal Home Loan Bank stock 16,636 13,823
Goodwill 56,458 49,600
Other intangible assets 8,686 7,371
Interest receivable 11,526 10,535
Cash value of life insurance 57,944 54,504
Other assets   36,074       31,995  
Total assets $ 2,918,080     $ 2,652,401  
Liabilities
Deposits
Non-interest bearing $ 397,412 $ 335,955
Interest bearing   1,684,849       1,544,198  
Total deposits 2,082,261 1,880,153
Borrowings 492,883 449,347
Subordinated debentures 32,874 32,797
Interest payable 961 507
Other liabilities   28,099       22,765  
Total liabilities   2,637,078       2,385,569  
Commitments and contingent liabilities
Stockholders' Equity
Preferred stock, Authorized, 1,000,000 shares
Series B shares $.01 par value, $1,000 liquidation value
Issued 0 and 12,500 shares - 12,500
Common stock, no par value
Authorized, 22,500,000 shares
Issued, 12,590,784 and 11,995,324 shares
Outstanding, 12,571,534 and 11,939,887 shares - -
Additional paid-in capital 120,758 106,370
Retained earnings 156,651 148,685
Accumulated other comprehensive income (loss)   3,593       (723 )
Total stockholders' equity   281,002       266,832  
Total liabilities and stockholders' equity $ 2,918,080     $ 2,652,401  
 
 

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
2016   2015   2016   2015
(Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Interest Income    
Loans receivable $ 20,794 $ 17,981 $ 40,541 $ 34,843
Investment securities
Taxable 2,661 2,067 5,205 4,221
Tax exempt   1,195     1,079       2,432       2,156  
Total interest income   24,650     21,127       48,178       41,220  
Interest Expense
Deposits 1,557 1,237 3,048 2,469
Borrowed funds 1,721 1,539 3,480 3,018
Subordinated debentures   503     501       1,007       997  
Total interest expense   3,781     3,277       7,535       6,484  
Net Interest Income 20,869 17,850 40,643 34,736
Provision for loan losses   232     1,906       764       2,520  
Net Interest Income after Provision for Loan Losses   20,637     15,944       39,879       32,216  
Non-interest Income
Service charges on deposit accounts 1,335 1,085 2,573 2,084
Wire transfer fees 175 182 296 333
Interchange fees 1,663 1,366 3,121 2,468
Fiduciary activities 1,465 1,216 3,100 2,513
Gain on sale of investment securities (includes $767 for the three months
ended and $875 for the six months ended June 30, 2016 and $0 for the
three months ended and $124 for the six months ended June 30, 2015,
related to accumulated other comprehensive earnings reclassifications) 767 - 875 124
Gain on sale of mortgage loans 3,529 2,642 5,643 5,021
Mortgage servicing income net of impairment 500 300 947 479
Increase in cash value of bank owned life insurance 351 257 696 515
Death benefit on bank owned life insurance - - - 145
Other income   84     138       482       570  
Total non-interest income   9,869     7,186       17,733       14,252  
Non-interest Expense
Salaries and employee benefits 10,317 8,385 20,382 16,889
Net occupancy expenses 1,901 1,375 3,837 2,926
Data processing 1,134 966 2,239 1,889
Professional fees 747 660 1,578 1,187
Outside services and consultants 2,198 918 3,297 1,544
Loan expense 1,409 1,367 2,604 2,624
FDIC insurance expense 409 339 814 676
Other losses 136 150 403 105
Other expense   3,304     2,490       6,148       4,878  
Total non-interest expense   21,555     16,650       41,302       32,718  
Income Before Income Tax 8,951 6,480 16,310 13,750
Income tax expense (includes $268 for the three months ended and $306 for
the six months ended June 30, 2016 and $0 for the three months ended
and $43 for the six months ended June 30, 2015, related to income tax
expense from reclassification items)   2,625     1,752       4,603       3,664  
Net Income 6,326 4,728 11,707 10,086
Preferred stock dividend   -     (31 )     (42 )     (63 )
Net Income Available to Common Shareholders $ 6,326   $ 4,697     $ 11,665     $ 10,023  
Basic Earnings Per Share $ 0.52 $ 0.51 $ 0.97 $ 1.09
Diluted Earnings Per Share 0.52 0.49 0.96 1.04

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

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