Market Overview

Horizon Bancorp Announces Record Quarterly and Nine-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 nine-month periods ended September 30, 2016. All share data has been adjusted to reflect Horizon's three-for-two stock split announced on October 19, 2016 to be issued on November 14, 2016.

SUMMARY:

  • Net income for the third quarter of 2016 was $6.6 million or $.30 diluted earnings per share compared to $4.3 million or $.24 diluted earnings per share for the third quarter of 2015.
  • Excluding acquisition-related expenses and purchase accounting adjustments, net income for the third quarter of 2016 increased 29.6% compared to the same period of 2015 to $8.4 million or $.39 diluted earnings per share.
  • Net income for the first nine months of 2016 was $18.3 million or $.94 diluted earnings per share compared to $14.4 million or $.92 diluted earnings per share for the first nine months of 2015.
  • 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 2016 increased 32.1% compared to the same period of 2015 to $20.7 million or $1.07 diluted earnings per share.
  • Excluding the LaPorte Bancorp, Inc. ("LaPorte Bancorp") acquisition, mortgage warehouse loans and loans held for sale, loans increased 4.1% on an annualized basis during the third quarter of 2016.
  • Net interest income for the first nine months of 2016 increased 19.3% or $10.5 million compared to the same period in 2015.
  • Net interest margin, excluding the impact of acquisitions ("core net interest margin"), was 3.31% for the third quarter of 2016 compared to 3.42% for the prior quarter and 3.44% for the same period in 2015.
  • Non-interest income for the first nine months of 2016 increased 22.7% or $5.1 million compared to the same period in 2015.
  • Horizon's tangible book value per share rose to $11.76 at September 30, 2016, compared to $11.02 at December 31, 2015 and $10.89 at September 30, 2015.
  • Horizon opened its first commercial office in Fort Wayne, Indiana on September 14, 2016. The new location will offer commercial loans and cash management services and will be led by Greg Haney, Horizon's Fort Wayne Market President.

Craig Dwight, Chairman and CEO, commented: "The Horizon team was very busy in the third quarter of 2016 and we are proud of what they have accomplished. Our balanced strategy of organic growth, expansion into new markets and well-executed acquisitions contributed to Horizon's increase in net income and earnings per share during the quarter. Core net income, excluding acquisition-related expenses and purchase accounting adjustments, gain on sale of investment securities and the death benefit on bank owned life insurance, was $8.4 million for the third quarter and $20.7 million for the first nine months of 2016. Core diluted earnings per share was $.39 for the third quarter and $1.07 for the first nine months of 2016, an increase over the same periods of 2015 of 7.3% and 7.1%, respectively."

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

Non-GAAP Reconciliation of Net Income

2016   2015     2016   2015
Net income as reported $ 6,602 $ 4,288 $ 18,309 $ 14,374
Merger expenses 2,953 3,648 5,472 4,364
Tax effect   (886 )     (1,219 )       (1,582 )     (1,402 )
Net income excluding merger expenses 8,668 6,717 22,199 17,336
 
Gain on sale of investment securities - - (875 ) (124 )
Tax effect   -       -         306       43  
Net income excluding gain on sale of investment securities 8,668 6,717 21,630 17,255
 
Death benefit on bank owned life insurance ("BOLI") - - - (145 )
Tax effect   -       -         -       51  
Net income excluding death benefit on BOLI   8,668       6,717         21,630       17,161  
 
Acquisition-related purchase accounting adjustments ("PAUs") (459 ) (402 ) (1,404 ) (2,282 )
Tax effect   161       141         491       799  
Net income excluding PAUs $ 8,370     $ 6,456       $ 20,717     $ 15,678  
 

Non-GAAP Reconciliation of Diluted Earnings per Share

Diluted earnings per share as reported $ 0.30 $ 0.24 $ 0.94 $ 0.92
Merger expenses 0.14 0.20 0.28 0.28
Tax effect   (0.04 )     (0.07 )       (0.08 )     (0.09 )
Diluted earnings per share excluding merger expenses 0.40 0.37 1.14 1.11
 
Gain on sale of investment securities - - (0.05 ) (0.01 )
Tax effect   -       -         0.02       0.00  
Net income excluding gain on sale of investment securities 0.40 0.37 1.11 1.10
 
Death benefit on BOLI - - - (0.01 )
Tax effect   -       -         -       0.00  
Net income excluding death benefit on BOLI   0.40       0.37         1.11       1.09  
 
Acquisition-related PAUs (0.02 ) (0.02 ) (0.07 ) (0.15 )
Tax effect   0.01       0.01         0.03       0.05  
Diluted earnings per share excluding PAUs $ 0.39     $ 0.36       $ 1.07     $ 0.99  
 

Mr. Dwight continued, "The third quarter of 2016 was highlighted by commercial loan growth in our Kalamazoo and Indianapolis markets, continued asset quality improvement, the build-out of our new Fort Wayne, Indiana commercial team and the integrations of our recently closed Kosciusko Financial, Inc. ("Kosciusko") and LaPorte Bancorp acquisitions."

Horizon completed the systems conversion of LaPorte Bancorp on October 22, 2016 and announced on October 14, 2016 the receipt of all regulatory approvals required for it's previously announced CNB Bancorp acquisition. Horizon also opened its Fort Wayne, Indiana commercial office on September 14, 2016, led by Greg Haney, Horizon's Fort Wayne Market President. Dwight concluded, "We are thrilled to welcome these exceptional bankers to our team and look forward to continuing Horizon's successful growth story."

Income Statement Highlights

Net income for the third quarter of 2016 was $6.6 million or $.30 diluted earnings per share compared to $4.3 million or $.24 diluted earnings per share in the third 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 $4.6 million and $1.7 million, respectively, partially offset by increases in non-interest expense of $2.6 million, income tax expense of $1.2 million and the diluted shares outstanding primarily due to the stock issued in the Kosciusko and LaPorte Bancorp acquisitions. Excluding acquisition-related expenses and purchase accounting adjustments, net income for the third quarter of 2016 was $8.4 million or $.39 diluted earnings per share compared to $6.5 million or $.36 diluted earnings per share in the third quarter of 2015.

Net income for the nine months ended September 30, 2016 was $18.3 million or $.94 diluted earnings per share compared to $14.4 million or $.92 diluted earnings per share for the nine months ended September 30, 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 $10.5 million and $5.1 million, respectively, and a decrease in the provision for loan losses of $1.6 million, partially offset by increases in non-interest expense of $11.2 million and income tax expense of $2.2 million and the diluted shares outstanding primarily due to the stock issued in the Kosciusko and LaPorte Bancorp 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 nine months of 2016 was $20.7 million or $1.07 diluted earnings per share compared to $15.7 million or $.99 diluted earnings per share in the same period of 2015.

Horizon's net interest margin was 3.37% during the third quarter of 2016, down from 3.48% for the prior quarter and 3.51% for same period of 2015. The decrease in the net interest margin compared to the prior quarter and the same period of 2015 was due to lower yields on new loans and re-pricing earning assets, the impact of acquisitions and higher levels of cash during the quarter due to acquisitions, partially offset by lower rates on interest-bearing liabilities. Excluding acquisition-related purchase accounting adjustments, the margin would have been 3.31% for the third quarter of 2016 compared to 3.42% for the prior quarter and 3.44% for the same period of 2015. Interest income from acquisition-related purchase accounting adjustments was $459,000, $397,000 and $402,000 for the three months ended September 30, 2016, June 30, 2016, and September 30, 2015, respectively.

Horizon's net interest margin was 3.43% for the nine months ending September 30, 2016, down from 3.59% for same period of 2015. Excluding interest income from acquisition-related purchase accounting adjustments, the margin would have been 3.36% for the nine months ending September 30, 2016 compared to 3.44% for same period of 2015. Interest income from acquisition-related purchase accounting adjustments was $1.4 million and $2.3 million for the nine months ended September 30, 2016 and September 30, 2015, respectively.

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

Net Interest Margin As Reported

2016   2016   2015     2016   2015
Net interest income $ 24,410 $ 20,869 $ 19,776 $ 65,053   $ 54,512
Average interest-earning assets 2,957,944 2,471,354 2,304,515 2,591,566 2,072,276
Net interest income as a percent of average interest-
earning assets ("Net Interest Margin") 3.37 % 3.48 % 3.51 % 3.43 % 3.59 %
 

Impact of Acquisitions

Interest income from acquisition-related
purchase accounting adjustments $ (459 ) $ (397 ) $ (402 ) $ (1,404 ) $ (2,282 )
 

Excluding Impact of Acquisitions

Net interest income $ 23,951 $ 20,472 $ 19,374 $ 63,649 $ 52,230
Average interest-earning assets 2,957,944 2,471,354 2,304,515 2,591,566 2,072,276
Core Net Interest Margin 3.31 % 3.42 % 3.44 % 3.36 % 3.44 %
 

Lending Activity

Total loans increased $440.8 million from $1.8 billion as of December 31, 2015 to $2.2 billion as of September 30, 2016 as commercial loans increased by $242.5 million, mortgage warehouse loans increased by $82.2 million, residential mortgage loans increased by $93.0 million and consumer loans increased by $23.7 million. Total loans, excluding acquired loans, mortgage warehouse loans and loans held for sale, increased 1.0% during the third quarter of 2016 or 4.1% on an annualized and 2.7% during the first nine months of 2016 or 3.6% on an annualized basis.

Residential mortgage lending activity during the third quarter of 2016 generated $3.5 million in income from the gain on sale of mortgage loans, an increase of $734,000 from the same period of 2015. Total origination volume in the third quarter of 2016, including loans placed into portfolio, totaled $129.0 million, representing an increase of 1.2% from the same period of 2015. Purchase money mortgage originations during the third quarter of 2016 represented 66.5% of total originations compared to 78.2% of originations during the previous quarter and 81.0% during the third quarter of 2015.

Loan balances in the Kalamazoo and Indianapolis markets totaled $182.6 million and $197.7 million, respectively, as of September 30, 2016. Combined, these markets contributed $29.7 million in loan growth during the third quarter of 2016 or 33.8% on an annualized basis.

 
Loan Growth by Type, Excluding Acquired Loans
Three Months Ended September 30, 2016
(Dollars in Thousands, Unaudited)
              Excluding Acquired Loans
Acquired     Annualized
September 30 June 30 Amount LaPorte Amount Percent Percent
      2016   2016   Change   Loans     Change   Change   Change
Commercial loans $ 1,047,450 $ 874,580 $ 172,870 $ (154,223 ) $ 18,647 2.1 % 8.5 %
Residential mortgage loans 530,162 493,626 36,536 (42,603 ) (6,067 ) -1.2 % -4.9 %
Consumer loans   386,031     363,920     22,111       (16,801 )       5,310   1.5 % 5.8 %
Subtotal 1,963,643 1,732,126 231,517 (213,627 ) 17,890 1.0 % 4.1 %
Held for sale loans 7,369 7,812 (443 ) - (443 ) -5.7 % -22.6 %
Mortgage warehouse loans   226,876     205,699     21,177       (99,752 )       (78,575 ) -38.2 % -152.0 %
Total loans $ 2,197,888   $ 1,945,637   $ 252,251     $ (313,379 )     $ (61,128 ) -3.1 % -12.5 %
 
Loan Growth by Type, Excluding Acquired Loans
Nine Months Ended September 30, 2016
(Dollars in Thousands)
Acquired Excluding Acquired Loans
Kosciusko Annualized
September 30 December 31 Amount and LaPorte Amount Percent Percent
      2016   2015   Change   Loans     Change   Change   Change
      (Unaudited)                          
Commercial loans $ 1,047,450 $ 804,995 $ 242,455 $ (224,229 ) $ 18,226 2.3 % 3.0 %
Residential mortgage loans 530,162 437,144 93,018 (68,847 ) 24,171 5.5 % 7.4 %
Consumer loans   386,031     362,300     23,731       (23,120 )       611   0.2 % 0.2 %
Subtotal 1,963,643 1,604,439 359,204 (316,196 ) 43,008 2.7 % 3.6 %
Held for sale loans 7,369 7,917 (548 ) - (548 ) -6.9 % -9.2 %
Mortgage warehouse loans   226,876     144,692     82,184       (99,752 )       (17,568 ) -12.1 % -16.2 %
Total loans $ 2,197,888   $ 1,757,048   $ 440,840     $ (415,948 )     $ 24,892   1.4 % 1.9 %
 

The provision for loan losses was $455,000 for the third quarter of 2016 compared to $300,000 for the same period of 2015. The increase in the provision for loan losses during the third quarter of 2016 was due to continued loan growth. The provision for loan losses for the first nine months of 2016 was $1.2 million compared to $2.8 million for the same period of 2015. The decrease in the provision for loan losses during the first nine months of 2016 was due to lower charge-offs, stable delinquency trends and a decrease in non-performing loans.

The ratio of the allowance for loan losses to total loans decreased to 0.66% as of September 30, 2016 from 0.83% as of December 31, 2015 due to an increase in total loans. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 0.87% as of September 30, 2016. Loan loss reserves and credit-related loan discounts on acquired loans as a percentage of total loans was 1.40% as of September 30, 2016.

Non-performing loans to total loans declined 37 basis points to 0.58% at September 30, 2016 from 0.95% at December 31, 2015. Non-performing loans totaled $12.8 million as of September 30, 2016 a decrease of $3.9 million from $16.7 million as of December 31, 2015. Compared to December 31, 2015, non-performing commercial loans decreased by $1.6 million, non-performing real estate loans decreased by $2.0 million and non-performing consumer loans decreased $330,000.

 
Non- GAAP Allowance for Loan and Lease Loss Detail
As of September 30, 2016
(Dollars in Thousands, Unaudited)
                           
Horizon
Legacy     Heartland     Summit     Peoples     Kosciusko     LaPorte     Total
Pre-discount loan balance $ 1,673,722 $ 15,719 $ 57,214 $ 155,318 $ 89,490 $ 215,531 $ 2,206,994
 
Allowance for loan losses (ALLL) 14,524 - - - - - 14,524
Loan discount   N/A         1,067         2,645         3,545         1,132         8,086         16,475  
ALLL+loan discount 14,524 1,067 2,645 3,545 1,132 8,086 30,999
 
Loans, net $ 1,659,198       $ 14,652       $ 54,569       $ 151,773       $ 88,358       $ 207,445       $ 2,175,995  
 
ALLL/ pre-discount loan balance 0.87 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.66 %
Loan discount/ pre-discount loan balance N/A 6.79 % 4.62 % 2.28 % 1.26 % 3.75 % 0.75 %
ALLL+loan discount/ pre-discount loan balance 0.87 % 6.79 % 4.62 % 2.28 % 1.26 % 3.75 % 1.40 %
 

Expense Management

Total non-interest expense was $2.6 million higher in the third 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, data processing, professional fees, loan expense, and other expense reflecting overall company growth. Outside services and consultants expense decreased primarily due to the expense associated with the Peoples Bancorp acquisition that occurred in the third quarter of 2015. Non-interest expense for the third quarter of 2016 included $2.9 million of one- time merger-related expenses due to the Kosciusko, LaPorte Bancorp and CNB Bancorp acquisitions compared to $3.6 million in one-time merger-related expenses during the same period of 2015 due to the Peoples Bancorp acquisition.

Total non-interest expense was $11.2 million higher in the first nine 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 $4.0 million, employee benefits of $1.3 million, net occupancy expenses of $1.4 million, data processing expense of $685,000, professional fees of $594,000, loan expense of $111,000, FDIC deposit insurance expense of $180,000, other losses of $159,000 and other expense of $1.8 million due to overall company growth. Commission and bonus expense decreased by $261,000 due to decrease in incentive pay. Outside services and consultants expense increased $1.2 million primarily due to the expense associated with the Kosciusko, LaPorte Bancorp and CNB Bancorp acquisitions. Non-interest expense for the first nine months of 2016 included $5.5 million of one-time merger-related expenses due to the Kosciusko, LaPorte Bancorp and CNB Bancorp acquisitions compared to $4.4 million in one-time merger-related expenses in the same period of 2015 due to the Peoples Bancorp 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.

 
Non-GAAP Reconciliation of Tangible Stockholders' Equity and Tangible Book Value per Share
(Dollars in Thousands Except per Share Data)
                   
September 30 June 30 March 31 December 31 September 30
2016     2016     2016     2015     2015
(Unaudited)     (Unaudited)     (Unaudited)           (Unaudited)
Total stockholders' equity $ 345,525 $ 281,002 $ 261,417 $ 266,832 $ 264,738
Less: Preferred stock - - - 12,500 12,500
Less: Intangible assets   85,179       65,144       56,695       56,971       57,248
Total tangible stockholder's equity $ 260,346     $ 215,858     $ 204,722     $ 197,361     $ 194,990
 
Common shares outstanding 22,143,228 18,857,301 17,974,970 17,909,831 17,897,981
 
Tangible book value per common share $ 11.76 $ 11.45 $ 11.39 $ 11.02 $ 10.89
 

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
2016     2016     2016     2015     2015
Balance sheet:
Total assets $ 3,325,658 $ 2,918,080 $ 2,627,918 $ 2,652,401 $ 2,607,914
Investment securities 744,240 628,935 642,767 632,611 617,860
Commercial loans 1,047,450 874,580 797,754 804,995 795,271
Mortgage warehouse loans 226,876 205,699 119,876 144,692 138,974
Residential mortgage loans 530,162 493,626 442,806 437,144 430,946
Consumer loans 386,031 363,920 359,636 362,300 361,298
Earning assets 2,963,005 2,591,208 2,379,830 2,403,482 2,363,755
Non-interest bearing deposit accounts 479,771 397,412 343,025 335,955 338,436
Interest bearing transaction accounts 1,367,285 1,213,659 1,118,617 1,177,651 1,164,787
Time deposits 489,106 471,190 416,837 366,547 409,852
Borrowings 571,889 492,883 430,507 449,347 373,901
Subordinated debentures 37,418 32,874 32,836 32,797 32,758
Common stockholders' equity 345,525 281,002 261,417 254,332 252,238
Total stockholders' equity 345,525 281,002 261,417 266,832 264,738
 
Income statement: Three months ended
Net interest income $ 24,410 $ 20,869 $ 19,774 $ 20,222 $ 19,776
Provision for loan losses 455 232 532 342 300
Non-interest income 10,056 9,869 7,864 7,750 8,400
Non-interest expenses 24,820 21,555 19,747 19,240 22,235
Income tax expense   2,589         2,625         1,978         2,215         1,353  
Net income 6,602 6,326 5,381 6,175 4,288
Preferred stock dividend   -         -         (42 )       (31 )       (31 )
Net income available to common shareholders $ 6,602       $ 6,326       $ 5,339       $ 6,144       $ 4,257  
 
Per share data:
Basic earnings per share $ 0.31 $ 0.35 $ 0.30 $ 0.34 $ 0.24
Diluted earnings per share 0.30 0.34 0.30 0.34 0.24
Cash dividends declared per common share 0.10 0.10 0.10 0.10 0.10
Book value per common share 15.60 14.90 14.54 14.20 14.09
Tangible book value per common share 11.76 11.45 11.39 11.02 10.89
Market value - high 20.01 16.76 18.59 18.77 17.43
Market value - low $ 16.61 $ 15.87 $ 15.41 $ 15.72 $ 15.07
Weighted average shares outstanding - Basic 21,538,752 18,268,880 17,924,124 17,905,871 17,408,964
Weighted average shares outstanding - Diluted 21,651,953 18,364,167 18,012,726 18,020,615 17,839,882
 
Key ratios:
Return on average assets 0.80 % 0.94 % 0.83 % 0.94 % 0.67 %
Return on average common stockholders' equity 7.88 9.43 8.26 9.53 6.76
Net interest margin 3.37 3.48 3.45 3.50 3.51
Loan loss reserve to total loans 0.66 0.73 0.83 0.83 0.93
Non-performing loans to loans 0.58 0.68 0.87 0.95 1.21
Average equity to average assets 10.18 9.94 10.16 10.32 10.38
Bank only capital ratios:
Tier 1 capital to average assets 9.88 9.39 8.98 8.77 9.31
Tier 1 capital to risk weighted assets 12.35 12.51 12.33 11.80 12.30
Total capital to risk weighted assets 12.95 13.23 13.10 12.57 13.17
 
Loan data:
Substandard loans $ 33,914 $ 28,629 $ 23,600 $ 25,127 $ 26,073
30 to 89 days delinquent 3,821 2,887 2,149 5,011 4,868
 
90 days and greater delinquent - accruing interest $ 59 $ 24 $ 1 $ 28 $ 100
Trouble debt restructures - accruing interest 1,523 1,256 1,231 1,218 2,948
Trouble debt restructures - non-accrual 1,164 1,466 2,857 3,172 3,994
Non-accrual loans   10,032         10,426         10,895         12,262         13,956  
Total non-performing loans $ 12,778       $ 13,172       $ 14,984       $ 16,680       $ 20,998  
 
HORIZON BANCORP
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
 
    September 30     September 30
2016     2015
Balance sheet:
Total assets $ 3,325,658 $ 2,607,914
Investment securities 744,240 617,860
Commercial loans 1,047,450 795,271
Mortgage warehouse loans 226,876 138,974
Residential mortgage loans 530,162 430,946
Consumer loans 386,031 361,298
Earning assets 2,963,005 2,363,755
Non-interest bearing deposit accounts 479,771 338,436
Interest bearing transaction accounts 1,367,285 1,164,787
Time deposits 489,106 409,852
Borrowings 571,889 373,901
Subordinated debentures 37,418 32,758
Common stockholders' equity 345,525 252,238
Total stockholders' equity 345,525 264,738
 
Income statement: Nine Months Ended
Net interest income $ 65,053 $ 54,512
Provision for loan losses 1,219 2,820
Non-interest income 27,789 22,652
Non-interest expenses 66,122 54,953
Income tax expense   7,192         5,017  
Net income 18,309 14,374
Preferred stock dividend   (42 )       (94 )
Net income available to common shareholders $ 18,267       $ 14,280  
 
Per share data:
Basic earnings per share $ 0.95 $ 0.95
Diluted earnings per share 0.94 0.92
Cash dividends declared per common share 0.30 0.29
Book value per common share 15.60 14.09
Tangible book value per common share 11.76 10.89
Market value - high 20.01 17.43
Market value - low $ 15.41 $ 14.92
Weighted average shares outstanding - Basic 19,252,295 15,044,129
Weighted average shares outstanding - Diluted 19,346,376 15,580,711
 
Key ratios:
Return on average assets 0.86 % 0.85 %
Return on average common stockholders' equity 8.82 9.12
Net interest margin 3.43 3.59
Loan loss reserve to total loans 0.66 0.93
Non-performing loans to loans 0.58 1.21
Average equity to average assets 10.13 9.81
Bank only capital ratios:
Tier 1 capital to average assets 9.88 9.31
Tier 1 capital to risk weighted assets 12.35 12.30
Total capital to risk weighted assets 12.95 13.17
 
Loan data:
Substandard loans $ 33,914 $ 25,898
30 to 89 days delinquent 3,821 4,868
 
90 days and greater delinquent - accruing interest $ 59 $ 100
Trouble debt restructures - accruing interest 1,523 2,948
Trouble debt restructures - non-accrual 1,164 3,994
Non-accrual loans   10,032         13,956  
Total non-performing loans $ 12,778       $ 20,998  
 
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
2016     2016     2016     2015     2015
Commercial $ 6,222 $ 6,051 $ 6,460 $ 7,195 $ 8,842
Real estate 1,947 2,102 1,794 2,476 2,297
Mortgage warehousing 1,337 1,080 1,014 1,007 1,015
Consumer   5,018       4,993       4,968       3,856       4,014
Total $ 14,524     $ 14,226     $ 14,236     $ 14,534     $ 16,168
 
Net Charge-offs (Recoveries)

(Dollars in Thousands, Unaudited)

 
    Three months ended
September 30     June 30     March 31   December 31     September 30
2016     2016     2016   2015     2015
Commercial $ (5 ) $ 101 $ 403 $ 1,595 $ 77
Real estate - (31 ) 83 (59 ) 96
Mortgage warehousing - - - - -
Consumer   162         172         344       440         380
Total $ 157       $ 242       $ 830     $ 1,976       $ 553
 
Total Non-performing Loans

(Dollars in Thousands, Unaudited)

 
    September 30     June 30     March 31     December 31     September 30
2016     2016     2016     2015     2015
Commercial $ 5,419 $ 4,330 $ 5,774 $ 7,005 $ 10,832
Real estate 4,251 5,659 5,974 6,237 6,315
Mortgage warehousing - - - - -
Consumer   3,108       3,183       3,236       3,438       3,851
Total $ 12,778     $ 13,172     $ 14,984     $ 16,680     $ 20,998
 
Other Real Estate Owned and Repossessed Assets

(Dollars in Thousands, Unaudited)

 
    September 30     June 30     March 31     December 31     September 30
2016     2016     2016     2015     2015
Commercial $ 542 $ 542 $ 424 $ 161 $ 324
Real estate 3,182 2,925 3,393 3,046 958
Mortgage warehousing - - - - -
Consumer   67       69       -       -       -
Total $ 3,791     $ 3,536     $ 3,817     $ 3,207     $ 1,282
 
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)

 
      Three Months Ended     Three Months Ended
September 30, 2016 September 30, 2015
Average     Average Average     Average
Balance   Interest   Rate Balance   Interest   Rate
 
ASSETS
Interest-earning assets
Federal funds sold $ 35,492 $ 20 0.22 % $ 23,086 $ 2 0.03 %
Interest-earning deposits 55,047 32 0.23 % 16,340 5 0.12 %
Investment securities - taxable 530,228 2,446 1.84 % 401,702 2,149 2.12 %
Investment securities - non-taxable (1) 186,074 1,151 3.73 % 154,050 1,125 4.39 %
Loans receivable (2)(3)   2,151,103       25,313 4.69 %   1,709,337       20,297 4.72 %
Total interest-earning assets (1) 2,957,944 28,962 3.98 % 2,304,515 23,578 4.17 %
 
Non-interest-earning assets
Cash and due from banks 39,875 31,384
Allowance for loan losses (14,301 ) (16,427 )
Other assets   290,100     206,545  
 
$ 3,273,618   $ 2,526,017  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 1,896,156 $ 1,875 0.39 % $ 1,568,777 $ 1,566 0.40 %
Borrowings 510,738 2,128 1.66 % 303,521 1,729 2.26 %
Subordinated debentures   37,092       549 5.89 %   32,737       507 6.14 %
Total interest-bearing liabilities 2,443,986 4,552 0.74 % 1,905,035 3,802 0.79 %
 
Non-interest-bearing liabilities
Demand deposits 462,253 343,780
Accrued interest payable and
other liabilities 34,144 14,891
Stockholders' equity   333,235     262,311  
 
$ 3,273,618   $ 2,526,017  
 
Net interest income/spread $ 24,410 3.24 % $ 19,776 3.38 %
 
Net interest income as a percent
of average interest earning assets (1) 3.37 % 3.51 %
(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, 2016 September 30, 2015
Average     Average Average     Average
Balance   Interest   Rate Balance   Interest   Rate
ASSETS
Interest-earning assets
Federal funds sold $ 13,812 $ 23 0.22 % $ 10,563 $ 11 0.14 %
Interest-earning deposits 34,624 59 0.23 % 11,927 10 0.11 %
Investment securities - taxable 486,374 7,621 2.09 % 375,548 6,356 2.26 %
Investment securities - non-taxable (1) 183,142 3,583 3.63 % 145,576 3,281 3.96 %
Loans receivable (2)(3)   1,873,614       65,854 4.70 %   1,528,662       55,140 4.83 %
Total interest-earning assets (1) 2,591,566 77,140 4.05 % 2,072,276 64,798 4.25 %
 
Non-interest-earning assets
Cash and due from banks 36,220 30,729
Allowance for loan losses (14,334 ) (16,557 )
Other assets   243,021     174,363  
 
$ 2,856,473   $ 2,260,811  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 1,680,560 $ 4,923 0.39 % $ 1,347,882 $ 4,035 0.40 %
Borrowings 438,324 5,608 1.71 % 340,593 4,747 1.86 %
Subordinated debentures   34,144       1,556 6.09 %   32,698       1,504 6.15 %
Total interest-bearing liabilities 2,153,028 12,087 0.75 % 1,721,173 10,286 0.80 %
 
Non-interest-bearing liabilities
Demand deposits 387,768 303,309
Accrued interest payable and
other liabilities 26,397 14,582
Stockholders' equity   289,280     221,747  
 
$ 2,856,473   $ 2,260,811  
 
Net interest income/spread $ 65,053 3.30 % $ 54,512 3.45 %
 
Net interest income as a percent
of average interest earning assets (1) 3.43 % 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
Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands)

 
    September 30     December 31
2016     2015
(Unaudited)      
Assets
Cash and due from banks $ 83,721 $ 48,650
Investment securities, available for sale 557,213 444,982
Investment securities, held to maturity (fair value of $194,293 and $193,703) 187,027 187,629
Loans held for sale 7,369 7,917
Loans, net of allowance for loan losses of $14,524 and $14,534 2,175,995 1,734,597
Premises and equipment, net 67,265 60,798
Federal Reserve and Federal Home Loan Bank stock 20,877 13,823
Goodwill 75,596 49,600
Other intangible assets 9,583 7,371
Interest receivable 12,702 10,535
Cash value of life insurance 73,661 54,504
Other assets   54,649       31,995  
Total assets $ 3,325,658     $ 2,652,401  
Liabilities
Deposits
Non-interest bearing $ 479,771 $ 335,955
Interest bearing   1,856,391       1,544,198  
Total deposits 2,336,162 1,880,153
Borrowings 571,889 449,347
Subordinated debentures 37,418 32,797
Interest payable 1,015 507
Other liabilities   33,649       22,765  
Total liabilities   2,980,133       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, 66,000,000 shares
Issued, 22,172,103 and 17,909,831 shares
Outstanding, 22,143,228 and 17,909,831 shares - -
Additional paid-in capital 181,901 106,370
Retained earnings 161,026 148,685
Accumulated other comprehensive income (loss)   2,598       (723 )
Total stockholders' equity   345,525       266,832  
Total liabilities and stockholders' equity $ 3,325,658     $ 2,652,401  
 
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
2016   2015     2016   2015
(Unaudited)   (Unaudited)     (Unaudited)   (Unaudited)
Interest Income    
Loans receivable $ 25,313 $ 20,297 $ 65,854 $ 55,140
Investment securities
Taxable 2,498 2,156 7,703 6,377
Tax exempt   1,151     1,125         3,583       3,281  
Total interest income   28,962     23,578         77,140       64,798  
Interest Expense
Deposits 1,875 1,566 4,923 4,035
Borrowed funds 2,128 1,729 5,608 4,747
Subordinated debentures   549     507         1,556       1,504  
Total interest expense   4,552     3,802         12,087       10,286  
Net Interest Income 24,410 19,776 65,053 54,512
Provision for loan losses   455     300         1,219       2,820  
Net Interest Income after Provision for Loan Losses   23,955     19,476         63,834       51,692  
Non-interest Income
Service charges on deposit accounts 1,483 1,359 4,056 3,443
Wire transfer fees 292 160 588 493
Interchange fees 2,016 1,625 5,137 4,093
Fiduciary activities 1,653 1,520 4,753 4,033
Gain on sale of investment securities (includes $0 for the three months
ended and $875 for the nine months ended September 30, 2016 and $0 for the

three months ended and $124 for the nine months ended September 30, 2015,

related to accumulated other comprehensive earnings reclassifications) - - 875 124
Gain on sale of mortgage loans 3,528 2,794 9,171 7,815
Mortgage servicing income net of impairment 409 246 1,356 725
Increase in cash value of bank owned life insurance 449 374 1,145 889
Death benefit on bank owned life insurance - - - 145
Other income   226     322         708       892  
Total non-interest income   10,056     8,400         27,789       22,652  
Non-interest Expense
Salaries and employee benefits 12,210 10,652 32,592 27,541
Net occupancy expenses 2,174 1,723 6,011 4,649
Data processing 1,616 1,281 3,855 3,170
Professional fees 612 409 2,190 1,596
Outside services and consultants 2,686 3,209 5,983 4,753
Loan expense 1,482 1,351 4,086 3,975
FDIC insurance expense 465 423 1,279 1,099
Other losses 107 246 510 351
Other expense   3,468     2,941         9,616       7,819  
Total non-interest expense   24,820     22,235         66,122       54,953  
Income Before Income Tax 9,191 5,641 25,501 19,391
Income tax expense (includes $0 for the three months ended and $306 for
the nine months ended September 30, 2016 and $0 for the three months ended
and $43 for the nine months ended September 30, 2015, related to income tax
expense from reclassification items)   2,589     1,353         7,192       5,017  
Net Income 6,602 4,288 18,309 14,374
Preferred stock dividend   -     (31 )       (42 )     (94 )
Net Income Available to Common Shareholders $ 6,602   $ 4,257       $ 18,267     $ 14,280  
Basic Earnings Per Share $ 0.31 $ 0.24 $ 0.95 $ 0.95
Diluted Earnings Per Share 0.30 0.24 0.94 0.92
 

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

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