Market Overview

Horizon Bancorp Announces Record Net Income for 2017

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MICHIGAN CITY, Ind., Jan. 24, 2018 (GLOBE NEWSWIRE) -- (NASDAQ GS:HBNC) – Horizon Bancorp ("Horizon") today announced its unaudited financial results for the three-month and twelve-month periods ended December 31, 2017.  All share data has been adjusted to reflect Horizon's three-for-two stock split effective November 14, 2016.

SUMMARY:

  • Net income for the year ended December 31, 2017 was $33.1 million, or $1.43 diluted earnings per share, compared to $23.9 million, or $1.19 diluted earnings per share, for the year ended December 31, 2016.
  • Net income, excluding acquisition-related expenses, gain on sale of investment securities, prepayment penalties on borrowings, gain on the accounting for Horizon's equity interest in Lafayette Community Bancorp ("Lafayette"), tax reform bill impact and purchase accounting adjustments ("core net income") for the year ended December 31, 2017 increased 21.4% to $35.5 million or $1.53 diluted earnings per share compared to $29.2 million or $1.45 diluted earnings per share for the year of 2016.
  • Net income for the fourth quarter of 2017 was $7.6 million, or $0.30 diluted earnings per share, compared to $8.2 million, or $0.36 diluted earnings per share, for the third quarter of 2017 and $5.6 million, or $0.25 diluted earnings per share, for the fourth quarter of 2016.
  • Core net income for the fourth quarter of 2017 was $10.1 million, or $0.40 diluted earnings per share, compared to $9.2 million, or $0.41 diluted earnings per share, for the third quarter of 2017 and $8.5 million, or $0.38 diluted earnings per share, for the fourth quarter of 2016.
  • Return on average assets was 0.97% for the year ended December 31, 2017 compared to 0.81% for the year ended December 31, 2016.
  • Return on average assets, excluding acquisition-related expenses, gain on sale of investment securities, prepayment penalties on borrowings, gain on the accounting for Horizon's equity interest in Lafayette, tax reform bill impact and purchase accounting adjustments ("core return on average assets"), for the year ended December 31, 2017 was 1.04% compared to 0.99% for the year ended December 31, 2016.
  • Total loans increased by a rate of 32.2%, or $691.0 million, during 2017. Total loans, excluding acquired loans, increased by a rate of 11.3%, or $242.7 million, during 2017.
  • Commercial loans increased by a rate of 51.2%, or $547.9 million, during 2017. Commercial loans, excluding acquired commercial loans, increased by a rate of 14.3%, or $152.7 million, during 2017.
  • Consumer loans increased by a rate of 28.7%, or $114.4 million, during 2017. Consumer loans, excluding acquired consumer loans, increased by a rate of 26.3%, or $104.7 million, during 2017.
  • Net interest income increased $26.1 million, or 30.4%, to $112.1 million for the year ended December 31, 2017 compared to $86.0 million for the year ended December 31, 2016.
  • Net interest margin was 3.75% for the year ended December 31, 2017 compared to 3.29% for the year ended December 31, 2016. The improvement in net interest margin from the prior year was due to Horizon executing a strategy to reduce expensive funding costs in the fourth quarter of 2016, an increase in average interest-earning assets, an increase in loan yields and the increase in interest rates during 2017.
  • Net interest margin, excluding the impact of prepayment penalties on borrowings and purchase accounting adjustments ("core net interest margin"), was 3.64% for the year ended December 31, 2017 compared to 3.38% for the year ended December 31, 2016.
  • Horizon's tangible book value per share increased following the acquisitions of Lafayette and Wolverine Bancorp, Inc. ("Wolverine") to $12.72 at December 31, 2017, compared to $12.38 and $11.48 at September 30, 2017 and December 31, 2016, respectively.
  • On October 17, 2017, Horizon closed on the merger with Wolverine and its wholly-owned subsidiary, Wolverine Bank, headquartered in Midland, Michigan. The related system integration was successfully completed on November 10, 2017.

Craig Dwight, Chairman and CEO, commented: "I am very pleased to announce Horizon Bancorp's 2017 results and the incredible effort put forth by our entire team. Horizon's performance for the year required an incredible team effort, based on the fact that we reported solid organic loan growth and successfully closed on a single branch acquisition and two whole-banks mergers. In addition, we were able to improve our net interest margin as a result of changes we made to our balance sheet in the fourth quarter of 2016 and therefore realized the benefits of said changes in 2017. Horizon's core net income of $10.1 million for the fourth quarter and $35.5 million for the year is an increase of 19.0% and 21.4%, respectively, when compared to the prior year. Core diluted earnings per share increased 5.3%, to $0.40, for the fourth quarter and 5.5%, to $1.53, for 2017 when compared to the prior year."

Dwight continued, "We continued to follow our balanced strategy of well-executed acquisitions and organic growth throughout 2017. During the first quarter of 2017, Horizon completed the acquisition of a single branch of First Farmers Bank & Trust Company located in Bargersville, Indiana which added $3.4 million in loans and $14.8 million in deposits and enhanced our presence in this attractive and rapidly growing central Indiana market. During the third quarter of 2017, we completed the acquisition of Lafayette Community Bancorp adding an experienced team of bankers to capitalize on future opportunities in the growth market of Lafayette, Indiana. Horizon also completed the acquisition of Wolverine Bancorp, Inc. during the fourth quarter of 2017 adding another experienced team of bankers located at three full-service locations in the Great Lakes Bay Region of Michigan and a loan production office in Troy, Michigan. The acquisitions of Lafayette and Wolverine increased total loans by $445.0 million."

Mr. Dwight concluded, "In addition to these acquisitions, we continued to execute our organic growth strategy and experienced solid loan growth in 2017. Total loans, excluding acquired loans, loans held for sale and mortgage warehouse loans increased by 14.4%, or $288.9 million, primarily due to commercial and consumer loan growth. Horizon's growth markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo, grew by $109.1 million, or 27.5%, during the year. The addition of a seasoned consumer loan portfolio manager during the third quarter of 2016 and an increased focus on the management of direct consumer loans resulted in an increase of 26.3% in consumer loans during 2017."

Income Statement Highlights

Net income for the fourth quarter of 2017 was $7.6 million, or $0.30 diluted earnings per share, compared to $8.2 million, or $0.36 diluted earnings per share, for the third quarter of 2017 and $5.6 million, or $0.25 diluted earnings per share, for the fourth quarter of 2016. Excluding acquisition-related expenses, gain on sale of investment securities, prepayment penalties on borrowings, gain on the accounting for Horizon's equity interest in Lafayette, tax reform bill impact and purchase accounting adjustments ("core net income"), net income for the fourth quarter of 2017 was $10.1 million, or $0.40 diluted earnings per share, compared to $9.2 million, or $0.41 diluted earnings per share, for the third quarter of 2017 and $8.5 million, or $0.38 diluted earnings per share, for the fourth quarter of 2016.

The decrease in net income from the third quarter of 2017 to the fourth quarter of 2017 reflects increases in income tax expense of $3.3 million, non-interest expense of $1.8 million and provision for loan losses of $390,000, partially offset by increases in net interest income of $3.6 million and non-interest income of $1.3 million. In addition to the decrease in net income, diluted earnings per share decreased due to the stock issued in the Lafayette and Wolverine acquisitions. The increase in income tax expense was primarily due to the $2.4 million adjustment of Horizon's net deferred tax assets to the new corporate tax rate. The increase in non-interest income reflects the finalized entries of the Lafayette acquisition which resulted in a gain on the accounting for Horizon's previous equity interest in Lafayette of $530,000. Also, fiduciary activities income increased $255,000 from the third quarter to the fourth quarter.

The increase in net income and diluted earnings per share from the fourth quarter of 2016 to the same 2017 period reflects an increase in net interest income of $10.5 million, partially offset by increases in income tax expense of $4.1 million, non-interest expense of $3.7 million, provision for loan losses of $477,000 and average diluted shares outstanding. The majority of the increase in income tax expense was due to the $2.4 million adjustment of Horizon's net deferred tax assets to the new corporate tax rate. Gains on the sale of investment securities decreased $961,000 from the fourth quarter of 2016 to the same period in 2017, partially offset by the gain on the accounting for Horizon's previous equity interest in Lafayette of $530,000.

Net income for the year ended December 31, 2017 was $33.1 million, or $1.43 diluted earnings per share, compared to $23.9 million, or $1.19 diluted earnings per share, for the year ended December 31, 2016. The increase in net income and diluted earnings per share from 2016 to 2017 reflects an increase in net interest income of $26.1 million offset by a decrease in non-interest income of $2.3 million and increases in non-interest expense of $7.9 million, income tax expense of $6.0 million and provision for loan losses of $628,000. Core net income for the year ended December 31, 2017 was $35.5 million, or $1.53 diluted earnings per share, compared to $29.2 million, or $1.45 diluted earnings per share, for the year ended December 31, 2016.

 

Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share
(Dollars in Thousands Except per Share Data)
  Three Months Ended Twelve Months Ended
  December 31 December 31
Non-GAAP Reconciliation of Net Income  2017   2016   2017   2016 
  (Unaudited) (Unaudited)
Net income as reported $    7,650   $   5,603   $    33,117   $   23,912  
Merger expenses     1,444       1,354       3,656       6,827  
Tax effect     (418 )     (416 )     (1,003 )     (1,998 )
Net income excluding merger expenses     8,676       6,541       35,770       28,741  
     
Gain on sale of investment securities     -        (961 )     (38 )     (1,836 )
Tax effect     -        336       13       643  
Net income excluding gain on sale of investment securities     8,676       5,916       35,745       27,548  
         
Prepayment penalties on borrowings     -        4,839       -        4,839  
Tax effect     -        (1,694 )     -        (1,694 )
Net income excluding prepayment penalties on borrowings     8,676       9,061       35,745       30,693  
         
Gain on remeasurement of equity interest in Lafayette     (530 )     -        (530 )     -   
Tax effect     78       -        78       -   
Net income excluding gain on remeasurement of equity interest in Lafayette     8,224       9,061       35,293       30,693  
         
Tax reform bill impact     2,426       -        2,426       -   
Net income excluding tax reform bill impact     10,650       9,061       37,719       30,693  
         
Acquisition-related purchase accounting adjustments ("PAUs")     (868 )     (900 )     (3,484 )     (2,304 )
Tax effect     304       315       1,219       807  
Net income excluding (PAUs) $    10,086   $   8,476   $    35,454   $   29,196  
         
Non-GAAP Reconciliation of Diluted Earnings per Share        
Diluted earnings per share as reported $    0.30   $   0.25   $    1.43   $   1.19  
Merger expenses     0.06       0.06       0.16       0.34  
Tax effect     (0.02 )     (0.02 )     (0.04 )     (0.10 )
Diluted earnings per share excluding merger expenses     0.34       0.29       1.55       1.43  
         
Gain on sale of investment securities     -        (0.04 )     -        (0.09 )
Tax effect     -        0.02       -        0.03  
Diluted earnings per share excluding gain on sale of investment securities     0.34       0.27       1.55       1.37  
         
Prepayment penalties on borrowings     -        0.22       -        0.24  
Tax effect     -        (0.08 )     -        (0.08 )
Diluted earnings per share excluding prepayment penalties on borrowings     0.34       0.41       1.55       1.53  
         
Gain on remeasurement of equity interest in Lafayette     (0.02 )     -        (0.02 )     -   
Tax effect     -        -        -        -   
Diluted earnings per share excluding gain on remeasurement of equity interest in Lafayette     0.32       0.41       1.53       1.53  
         
Tax reform bill impact     0.10       -        0.10       -   
Diluted earnings per share excluding tax reform bill impact     0.42       0.41       1.63       1.53  
         
Acquisition-related PAUs     (0.03 )     (0.04 )     (0.15 )     (0.11 )
Tax effect     0.01       0.01       0.05       0.03  
Diluted earnings per share excluding PAUs $    0.40   $   0.38   $    1.53   $   1.45  
         


Horizon's net interest margin remained at 3.71% for the fourth quarter of 2017 when compared to the prior quarter and increased from 2.92% for the fourth quarter of 2016. The increase in net interest margin reflects a decrease in the cost of interest-bearing liabilities of 66 basis points and an increase in the yield of interest-earning assets of 25 basis points. The decrease in the cost of interest-bearing liabilities was primarily due to prepayment penalties incurred on high fixed-rate borrowings as part of Horizon's balance sheet restructuring transaction in the fourth quarter of 2016. The increase in the yield of interest-earning assets was due to an increase in the yield on taxable investment securities and loans receivable of 28 and 6 basis points, respectively. Excluding prepayment penalties on borrowings and acquisition-related purchase accounting adjustments ("core net interest margin"), the margin was 3.61% for the fourth quarter of 2017 compared to 3.63% for the prior quarter and 3.45% for the fourth quarter of 2016. Interest expense from the prepayment penalties on borrowings was $4.8 million during the three months ended December 31, 2016. Interest income from acquisition-related purchase accounting adjustments was $868,000, $661,000 and $900,000 for the three months ended December 31, 2017, September 30, 2017 and December 31, 2016, respectively.

Horizon's net interest margin increased to 3.75% for the year ended December 31, 2017 compared to 3.29% for the year ended December 31, 2016. The increase in net interest margin reflects a decrease in the cost of interest-bearing liabilities of 26 basis points and an increase in the yield of interest-earning assets of 24 basis points. The decrease in the cost of interest-bearing liabilities was primarily due to Horizon's balance sheet restructuring transaction completed in the fourth quarter of 2016 resulting in a decrease of 116 basis points in the cost of borrowings when comparing 2017 to 2016. The increase in the yield on interest-earning assets was due to a 12 basis point increase in the yield on loans receivable and an 11 basis point increase on taxable investment securities. Core net interest margin increased to 3.64% for the year ended December 31, 2017 compared to 3.38% for the year ended December 31, 2016. Interest expense from the prepayment penalties on borrowings was $4.8 million during 2016. Interest income from acquisition-related purchase accounting adjustments was $3.5 million and $2.3 million for the year ended December 31, 2017 and 2016, respectively.


 
Non-GAAP Reconciliation of Net Interest Margin
(Dollars in Thousands, Unaudited)
  Three Months Ended Twelve Months Ended
  December 31 September 30 December 31 December 31
Net Interest Margin As Reported  2017   2017   2016   2017   2016 
Net interest income $    31,455   $   27,879   $   20,939   $    112,100   $   85,992  
Average interest-earning assets     3,471,169       3,078,611       2,932,145       3,074,464       2,683,383  
Net interest income as a percent of average interest-        
earning assets ("Net Interest Margin")   3.71 %   3.71 %   2.92 %   3.75 %   3.29 %
         
Impact of Prepayment Penalties on Borrowings        
Interest expense from prepayment penalties on         
borrowings $    -   $   -   $   4,839   $    -   $   4,839  
         
Impact of Acquisitions        
Interest income from acquisition-related        
purchase accounting adjustments $    (868 ) $   (661 ) $   (900 ) $    (3,484 ) $   (2,304 )
         
Excluding Impact of Prepayment Penalties and Acquisitions        
Net interest income $    30,587   $   27,218   $   24,878   $    108,616   $   88,527  
Average interest-earning assets     3,471,169       3,078,611       2,932,145       3,074,464       2,683,383  
Core Net Interest Margin   3.61 %   3.63 %   3.45 %   3.64 %   3.38 %
         


Lending Activity

Total loans increased $405.6 million from $2.429 billion as of September 30, 2017 to $2.835 billion as of December 31, 2017 as commercial loans increased by $344.1 million, residential mortgage loans increased by $35.7 million and consumer loans increased by $27.4 million. Total loans, excluding acquired loans, mortgage warehouse loans and loans held for sale increased by $96.5 million when compared to September 30, 2017.


Loan Growth by Type, Excluding Acquired Loans
Three Months Ended December 31, 2017
(Dollars in Thousands)
  Excluding Acquired Loans
  December 31 September 30 Amount Acquired Amount Percent
   2017  2017 Change Loans Change Change
  (Unaudited) (Unaudited)        
Commercial loans $    1,617,870 $   1,273,790 $   344,080   $   (276,167 ) $   67,913   5.3 %
Residential mortgage loans     606,760     571,062     35,698       (30,603 )     5,095   0.9 %
Consumer loans     512,857     485,490     27,367       (3,897 )     23,470   4.8 %
Subtotal     2,737,487     2,330,342     407,145       (310,667 )     96,478   4.1 %
Held for sale loans     3,094     3,616     (522 )     -        (522 ) -14.4 %
Mortgage warehouse loans     94,508     95,483     (975 )     -        (975 ) -1.0 %
Total loans $    2,835,089 $   2,429,441 $   405,648   $   (310,667 ) $   94,981   3.9 %
 


Total loans increased $691.0 million to $2.835 billion at December 31, 2017 from $2.144 billion at December 31, 2016 as commercial loans increased by $547.9 million, consumer loans increased by $114.4 million and residential mortgage loans increased by $74.9 million, partially offset by a decrease in mortgage warehouse loans of $41.2 million and loans held for sale of $5.0 million. Total loans, excluding acquired loans, mortgage warehouse loans and loans held for sale, increased by a rate of 14.4%, or $288.9 million, during 2017.


 
Loan Growth by Type, Excluding Acquired Loans
Twelve Months Ended December 31, 2017
(Dollars in Thousands)
  Excluding Acquired Loans
  December 31 December 31 Amount Acquired Amount Percent
   2017  2016 Change Loans Change Change
  (Unaudited)          
Commercial loans $    1,617,870 $   1,069,956 $   547,914   $   (395,167 ) $   152,747   14.3 %
Residential mortgage loans     606,760     531,874     74,886       (43,423 )     31,463   5.9 %
Consumer loans     512,857     398,429     114,428       (9,739 )     104,689   26.3 %
Subtotal     2,737,487     2,000,259     737,228       (448,329 )     288,899   14.4 %
Held for sale loans     3,094     8,087     (4,993 )     -        (4,993 ) -61.7 %
Mortgage warehouse loans     94,508     135,727     (41,219 )     -        (41,219 ) -30.4 %
Total loans $    2,835,089 $   2,144,073 $   691,016   $   (448,329 ) $   242,687   11.3 %
 


Residential mortgage lending activity for the three months ended December 31, 2017 generated $2.0 million in income from the gain on sale of mortgage loans, an increase of $37,000 from the previous quarter and a decrease of $612,000 from the same period in 2016. Total origination volume for the fourth quarter of 2017, including loans placed into portfolio, totaled $90.1 million, representing a decrease of 5.3% from the previous quarter and a decrease of 24.0% from the same period in 2016.

Residential mortgage lending activity for the year ended December 31, 2017 generated $7.9 million in income from the gain on sale of mortgage loans, a decrease of $3.4 million when compared to the year ended December 31, 2016. Total origination volume for the year ended December 31, 2017, including loans placed into portfolio, totaled $361.5 million, a decrease of 21.4% compared to the year ended December 31, 2016.

The decrease in mortgage loan origination volume was primarily due to a decrease in mortgage loan refinance activity when comparing 2017 to 2016. Purchase money mortgage originations during the fourth quarter of 2017 represented 73.7% of total originations compared to 80.2% of originations during the previous quarter and 65.7% during the fourth quarter of 2016. Purchase money mortgage originations for the year ended December 31, 2017 represented 76.1% of originations compared to 69.5% for the year ended December 31, 2016.

The provision for loan losses totaled $1.1 million for the fourth quarter of 2017 compared to $710,000 for the third quarter of 2017 and $623,000 for the fourth quarter of 2016. The provision for loan losses totaled $2.5 million and $1.8 million for the years ended December 31, 2017 and 2016, respectively. The increase in the provision for loan losses in 2017 was due to additional allocations for loan growth in new markets and an increase in allocation for agricultural economic factors.

The ratio of the allowance for loan losses to total loans decreased to 0.58% as of December 31, 2017 from 0.69% as of December 31, 2016 due to an increase in gross loans. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 0.81% as of December 31, 2017 compared to 0.91% as of December 31, 2016. Loan loss reserves and credit-related loan discounts on acquired loans as a percentage of total loans were 1.23% as of December 31, 2017 compared to 1.39% as of December 31, 2016.


                     
Non-GAAP Allowance for Loan and Lease Loss Detail
As of December 31, 2017
(Dollars in Thousands, Unaudited)
 
  Horizon  
  Legacy Heartland Summit Peoples Kosciusko LaPorte CNB Lafayette Wolverine Total
Pre-discount loan balance $   2,019,194   $   11,646   $   40,995   $   113,171   $   60,497   $   142,824   $   6,583   $   144,444   $   311,313   $  2,850,667  
       
Allowance for loan losses (ALLL)     16,394       -        -        -        -        -        -        -        -        16,394  
Loan discount    N/A       800       2,241       2,754       758       3,796       167       3,226       4,930       18,672  
ALLL + loan discount     16,394       800       2,241       2,754       758       3,796       167       3,226       4,930       35,066  
       
Loans, net $  2,002,800   $   10,846   $   38,754   $   110,417   $   59,739   $   139,028   $   6,416   $   141,218   $   306,383   $   2,815,601  
       
ALLL/pre-discount loan balance   0.81 %   0.00 %   0.00 %   0.00 %   0.00 %   0.00 %   0.00 %   0.00 %   0.00 %   0.58 %
Loan discount/pre-discount loan balance   N/A     6.87 %   5.47 %   2.43 %   1.25 %   2.66 %   2.54 %   2.23 %   1.58 %   0.66 %
ALLL +loan discount/pre-discount loan balance   0.81 %   6.87 %   5.47 %   2.43 %   1.25 %   2.66 %   2.54 %   2.23 %   1.58 %   1.23 %
   


Non-performing loans to total loans increased 8 basis points to 0.58% at December 31, 2017 from 0.50% at December 31, 2016. Non-performing loans totaled $16.4 million as of December 31, 2017, an increase of $5.7 million from $10.7 million as of December 31, 2016. Compared to December 31, 2016, non-performing commercial loans increased by $4.7 million, non-performing real estate loans increased by $694,000 and non-performing consumer loans increased by $328,000. The increase in non-performing loans was driven primarily by loans acquired from Lafayette Community Bank and Wolverine Bank. 

Expense Management

Total non-interest expense was $1.8 million higher in the fourth quarter of 2017 when compared to the previous quarter. Excluding merger-related expenses of $1.4 million and $2.0 million during the three months ended December 31, 2017 and September 30, 2017, respectively, total non-interest expense increased $2.3 million, or 10.4%. The increase was primarily due to an increase in salaries and employee benefits of $1.4 million due to additional compensation expenses related to performance based incentive plans and the recent Wolverine acquisition. Other expense increased $338,000 reflecting overall company growth, market expansion and recent acquisitions. Outside services and consultant expense decreased $447,000 due to a lower amount of merger-related expenses incurred during the fourth quarter of 2017 when compared to the previous quarter. In addition, the cost savings anticipated from the Lafayette and Wolverine acquisitions were not yet fully realized during the fourth quarter of 2017. We expect the cost savings from these acquisitions will start to be fully realized in the first quarter of 2018.

Total non-interest expense was $3.7 million higher in the fourth quarter of 2017 compared to the same period of 2016. Excluding merger-related expenses of $1.4 million recorded in both quarters ended December 31, 2017 and 2016, total non-interest expense increased $3.6 million, or 17.0%. The increase was primarily due to an increase in salaries and employee benefits of $2.9 million, other expenses of $390,000, net occupancy expenses of $176,000, outside services and consultants expense of $147,000 and professional fees of $131,000. The increase in salaries and employee benefits reflects additional compensation expense related to performance based incentive plans, overall company growth and recent acquisitions. Other expenses and net occupancy expenses increased as a result of market expansions and acquisitions. The increase in outside services and consultants expense and professional fees was due to a higher amount of merger-related expenses during the fourth quarter of 2017 when compared to the same period of 2016. Finally, the cost savings anticipated from the Lafayette and Wolverine acquisitions were not yet fully realized during the fourth quarter of 2017. We expect the cost savings from these acquisitions will start to be fully realized in the first quarter of 2018.

Total non-interest expense for the year ended December 31, 2017 increased $7.9 million when compared to the year ended December 31, 2016. Excluding merger-related expenses of $3.7 million and $6.8 million recorded during the year ended December 31, 2017 and 2016, respectively, total non-interest expense increased $11.1 million. The increase was primarily due to increases in salaries and employee benefits of $7.4 million, net occupancy expenses of $1.2 million, other expenses of $1.3 million and data processing expenses of $547,000, partially offset by decreases in outside services and consultants expense of $845,000, loan expense of $612,000, FDIC insurance expense of $513,000, other losses of $316,000 and professional fees of $262,000. The increase in salaries and employee benefits expense reflects additional compensation expense related to performance based incentive plans, overall company growth and recent acquisitions. Net occupancy expenses, other expenses and data processing expenses increased primarily due to overall company growth, market expansions and acquisitions. Outside services and consultants expense and professional fees decreased due to a lower amount of merger-related expenses in 2017 compared to 2016. The decrease in loan expense reflects a decrease in loan collection expenses when comparing 2017 to 2016. The reduced assessment rate schedule implemented by the FDIC in the fourth quarter of 2016 resulted in the decrease of FDIC insurance expense in 2017. Other losses decreased primarily due to lower debit card fraud-related expenses in 2017.

Income tax expense totaled $5.8 million for the fourth quarter of 2017, an increase of $3.3 million and $4.1 million when compared to the third quarter of 2017 and fourth quarter of 2016, respectively. The increase was primarily due to the impact of the new corporate tax rate which was signed into law at the end of 2017. An adjustment to Horizon's net deferred tax asset of $2.4 million ($1.7 million of net deferred tax assets and $766,000 of net deferred tax assets related to accumulated other comprehensive income) was recorded to income tax expense during the fourth quarter of 2017 to reflect the new corporate tax rate. Also reflected in this increase in income tax expense is an increase of $2.7 million and $6.2 million in income before income taxes when comparing the fourth quarter of 2017 to the previous quarter and the fourth quarter of 2016, respectively.

Income tax expense increased $6.0 million for the year ended December 31, 2017 compared to the year ended December 31, 2016. The majority of this increase was due to an increase in income before taxes of $15.2 million during 2017. Also reflected in this increase is the adjustment to Horizon's net deferred tax asset of $2.4 million recorded during the fourth quarter of 2017.

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 relating to net income, diluted earnings per share, net interest margin, total loans and loan growth, the allowance for loan and lease losses, tangible stockholders' equity, tangible book value per share and the return on average assets. In each case, we have identified special circumstances that we consider to be non-recurring and have excluded them, to show the impact of such events as acquisition-related purchase accounting adjustments, prepayment penalties on borrowings and the tax reform bill, among others we have identified in our reconciliations. 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. 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.  See the tables and other information below and contained elsewhere in this press release for reconciliations of the non-GAAP figures identified herein and their most comparable GAAP measures.


           
Non-GAAP Reconciliation of Tangible Stockholders' Equity and Tangible Book Value per Share
(Dollars in Thousands Except per Share Data, Unaudited)
 
  December 31 September 30 June 30 March 31 December 31
   2017  2017  2017  2017  2016
Total stockholders' equity $    457,078 $   392,055 $   357,259 $   348,575 $   340,855
Less: Intangible assets     132,282     103,244     86,726     87,094     86,307
Total tangible stockholders' equity $    324,796 $   288,811 $   270,533 $   261,481 $   254,548
           
Common shares outstanding     25,529,819     23,325,459     22,176,465     22,176,465     22,171,596
           
Tangible book value per common share $    12.72 $   12.38 $   12.20 $   11.79 $   11.48


 
Non-GAAP Reconciliation of Return on Average Assets
(Dollars in Thousands, Unaudited)
  Three Months Ended Twelve Months Ended
  December 31 December 31
Non-GAAP Reconciliation of Net Income  2017   2016   2017   2016 
Average Assets $    3,841,551   $   3,241,750   $    3,396,873   $   2,961,622  
         
Net income as reported     7,650       5,603       33,117       23,912  
Merger expenses     1,444       1,354       3,656       6,827  
Tax effect     (418 )     (416 )     (1,003 )     (1,998 )
Net income excluding merger expenses     8,676       6,541       35,770       28,741  
         
Gain on sale of investment securities     -       (961 )     (38 )     (1,836 )
Tax effect     -       336       13       643  
Net income excluding gain on sale of investment securities     8,676       5,916       35,745       27,548  
         
Prepayment penalties on borrowings     -       4,839       -       4,839  
Tax effect     -       (1,694 )     -       (1,694 )
Net income excluding prepayment penalties on borrowings     8,676       9,061       35,745       30,693  
         
Gain on remeasurement of equity interest in Lafayette     (530 )     -       (530 )     -  
Tax effect     78       -       78       -  
Net income excluding gain on remeasurement of equity interest in Lafayette     8,224       9,061       35,293       30,693  
         
Tax reform bill impact     2,426       -       2,426       -  
Net income excluding tax reform bill impact     10,650       9,061       37,719       30,693  
         
Acquisition-related purchase accounting adjustments (PAUs)     (868 )     (900 )     (3,484 )     (2,304 )
Tax effect     304       315       1,219       807  
Net income excluding PAUs $    10,086   $   8,476   $    35,454   $   29,196  
         
Non-GAAP Reconciliation of Return on Average Assets  
Return on average assets as reported   0.79 %   0.69 %   0.97 %   0.81 %
Merger expenses   0.15 %   0.17 %   0.11 %   0.23 %
Tax effect   -0.04 %   -0.05 %   -0.03 %   -0.07 %
Return on average assets excluding merger expenses   0.90 %   0.81 %   1.05 %   0.97 %
         
Gain on sale of investment securities   0.00 %   -0.12 %   0.00 %   -0.06 %
Tax effect   0.00 %   0.04 %   0.00 %   0.02 %
Return on average assets excluding gain on sale of investment securities   0.90 %   0.73 %   1.05 %   0.93 %
         
Prepayment penalties on borrowings   0.00 %   0.60 %   0.00 %   0.17 %
Tax effect   0.00 %   -0.21 %   0.00 %   -0.06 %
Return on average assets excluding prepayment penalties on borrowings   0.90 %   1.12 %   1.05 %   1.04 %
         
Gain on remeasurement of equity interest in Lafayette   -0.05 %   0.00 %   -0.02 %   0.00 %
Tax effect   0.01 %   0.00 %   0.00 %   0.00 %
Return on average assets excluding gain on remeasurement of equity interest in Lafayette   0.86 %   1.12 %   1.03 %   1.04 %
         
Tax reform bill impact   0.25 %   0.00 %   0.07 %   0.00 %
Return on average assets excluding tax reform bill impact   1.11 %   1.12 %   1.10 %   1.04 %
         
Acquisition-related PAUs   -0.09 %   -0.11 %   -0.10 %   -0.08 %
Tax effect   0.03 %   0.04 %   0.04 %   0.03 %
Return on average assets excluding PAUs   1.05 %   1.05 %   1.04 %   0.99 %
         


About Horizon

Horizon Bancorp is an independent, commercial bank holding company serving northern and central Indiana, and southern, central and the Great Lakes Bay regions of Michigan through its commercial banking subsidiary Horizon Bank. 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.

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

 

 
HORIZON BANCORP
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
 
  December 31 September 30 June 30 March 31 December 31
   2017   2017   2017   2017   2016 
Balance sheet:  
Total assets $   3,964,303   $   3,519,501   $   3,321,178   $   3,169,643   $   3,141,156  
Investment securities     710,113       708,449       704,525       673,090       633,025  
Commercial loans     1,617,870       1,273,790       1,143,761       1,106,471       1,069,956  
Mortgage warehouse loans     94,508       95,483       123,757       89,360       135,727  
Residential mortgage loans     606,760       571,062       549,997       533,646       531,874  
Consumer loans     512,857       485,490       450,209       417,476       398,429  
Earnings assets     3,563,307       3,153,230       2,990,924       2,845,922       2,801,030  
Non-interest bearing deposit accounts     601,805       563,536       508,305       502,400       496,248  
Interest bearing transaction accounts     1,712,246       1,536,169       1,401,407       1,432,228       1,499,120  
Time deposits     566,952       508,570       452,208       509,071       475,842  
Borrowings     564,157       458,152       485,304       319,993       267,489  
Subordinated debentures     37,653       37,607       37,562       37,516       37,456  
Total stockholders' equity     457,078       392,055       357,259       348,575       340,855  
 
Income statement: Three months ended
Net interest income $   31,455   $   27,879   $   27,198   $   25,568   $   20,939  
Provision for loan losses     1,100       710       330       330       623  
Non-interest income     9,344       8,021       8,212       7,559       9,484  
Non-interest expenses     26,291       24,513       22,488       21,521       22,588  
Income tax expense     5,758       2,506       3,520       3,052       1,609  
Net income     7,650       8,171       9,072       8,224       5,603  
Preferred stock dividend     -       -       -       -       -  
Net income available to common shareholders $   7,650   $   8,171   $   9,072   $   8,224   $   5,603  
 
Per share data:  
Basic earnings per share (1) $   0.30   $   0.36   $   0.41   $   0.37   $   0.25  
Diluted earnings per share (1)     0.30       0.36       0.41       0.37       0.25  
Cash dividends declared per common share (1)     0.13       0.13       0.13       0.11       0.11  
Book value per common share (1)     17.90       16.81       16.11       15.72       15.37  
Tangible book value per common share (1)     12.72       12.38       12.20       11.79       11.48  
Market value - high     29.21       29.17       27.50       28.09       28.41  
Market value - low $   25.99   $   25.30   $   24.73   $   24.91   $   17.84  
Weighted average shares outstanding - Basic     25,140,800       22,580,160       22,176,465       22,175,526       22,155,549  
Weighted average shares outstanding - Diluted     25,264,675       22,715,273       22,322,390       22,326,071       22,283,722  
 
Key ratios:  
Return on average assets   0.79 %   0.96 %   1.12 %   1.07 %   0.69 %
Return on average common stockholders' equity     6.75       8.92       10.24       9.66       6.49  
Net interest margin     3.71       3.71       3.84       3.80       2.92  
Loan loss reserve to total loans     0.58       0.64       0.66       0.70       0.69  
Non-performing loans to loans     0.58       0.51       0.51       0.46       0.50  
Average equity to average assets     11.70       10.74       10.94       11.12       10.59  
Bank only capital ratios:          
Tier 1 capital to average assets     9.94       9.90       9.87       10.26       9.93  
Tier 1 capital to risk weighted assets     12.18       12.33       12.82       13.40       13.33  
Total capital to risk weighted assets     12.72       12.93       13.44       14.05       13.98  
 
Loan data:  
Substandard loans $   46,162   $   36,883   $   34,870   $   30,865   $   30,361  
30 to 89 days delinquent     9,329       6,284       4,555       5,476       6,315  
           
90 days and greater delinquent - accruing interest $   167   $   162   $   160   $   245   $   241  
Trouble debt restructures - accruing interest     1,958       2,015       1,924       1,647       1,492  
Trouble debt restructures - non-accrual     1,013       1,192       668       998       1,014  
Non-accrual loans     13,276       9,065       8,811       6,944       7,936  
Total non-performing loans $   16,414   $   12,434   $   11,563   $   9,834   $   10,683  
 
(1) Adjusted for 3:2 stock split on November 14, 2016  

 

 
HORIZON BANCORP
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
 
  December 31 December 31
   2017   2016 
Balance sheet:  
Total assets $   3,964,303   $   3,141,156  
Investment securities     710,113       633,025  
Commercial loans     1,617,870       1,069,956  
Mortgage warehouse loans     94,508       135,727  
Residential mortgage loans     606,760       531,874  
Consumer loans     512,857       398,429  
Earnings assets     3,563,307       2,801,030  
Non-interest bearing deposit accounts     601,805       496,248  
Interest bearing transaction accounts     1,712,246       1,499,120  
Time deposits     566,952       475,842  
Borrowings     564,157       267,489  
Subordinated debentures     37,653       37,456  
Total stockholders' equity   457078     340855  
 
Income statement: Twelve months ended
Net interest income $   112,100   $   85,992  
Provision for loan losses     2,470       1,842  
Non-interest income     33,136       35,455  
Non-interest expenses     94,813       86,892  
Income tax expense     14,836       8,801  
Net income     33,117       23,912  
Preferred stock dividend     -       (42 )
Net income available to common shareholders $   33,117   $   23,870  
 
Per share data:  
Basic earnings per share (1) $   1.44   $   1.19  
Diluted earnings per share (1)     1.43       1.19  
Cash dividends declared per common share (1)     0.50       0.41  
Book value per common share (1)     17.90       15.37  
Tangible book value per common share (1)     12.72       11.48  
Market value - high     29.21       28.41  
Market value - low $   24.73   $   15.41  
Weighted average shares outstanding - Basic     23,035,824       19,987,728  
Weighted average shares outstanding - Diluted     23,183,287       20,082,410  
 
Key ratios:  
Return on average assets   0.97 %   0.81 %
Return on average common stockholders' equity     8.74       7.92  
Net interest margin     3.75       3.29  
Loan loss reserve to total loans     0.58       0.69  
Non-performing loans to loans     0.58       0.50  
Average equity to average assets     11.15       10.22  
Bank only capital ratios:    
Tier 1 capital to average assets     9.94       9.93  
Tier 1 capital to risk weighted assets     12.18       13.33  
Total capital to risk weighted assets     12.72       13.98  
 
Loan data:  
Substandard loans $   46,162   $   30,361  
30 to 89 days delinquent     9,329       6,315  
     
90 days and greater delinquent - accruing interest $   167   $   241  
Trouble debt restructures - accruing interest     1,958       1,492  
Trouble debt restructures - non-accrual     1,013       1,014  
Non-accrual loans     13,276       7,936  
Total non-performing loans $   16,414   $   10,683  
 
(1) Adjusted for 3:2 stock split on November 14, 2016  

 

 
  HORIZON BANCORP
 
  Allocation of the Allowance for Loan and Lease Losses
  (Dollars in Thousands, Unaudited)
 
  December 31 September 30 June 30 March 31 December 31
   2017   2017   2017   2017   2016
Commercial $    8,634   $   7,877   $   7,617   $   7,600   $   6,579
Real estate     2,188       2,129       1,750       1,697       2,090
Mortgage warehousing     1,030       1,048       1,090       1,042       1,254
Consumer     4,542       4,532       4,570       4,715       4,914
Total $    16,394   $   15,586   $   15,027   $   15,054   $   14,837
 
 
   
  Net Charge-offs (Recoveries)
  (Dollars in Thousands, Unaudited)
   
  Three Months Ended
  December 31 September 30 June 30 March 31 December 31
   2017   2017   2017   2017   2016
Commercial $    50   $   169   $   24   $   (134 ) $   49
Real estate     (9 )     24       (8 )     38       64
Mortgage warehousing     -       -       -       -       -
Consumer     251       (42 )     341       209       197
Total $    292   $   151   $   357   $   113   $   310
 
  Total Non-performing Loans
  (Dollars in Thousands, Unaudited)
   
  December 31 September 30 June 30 March 31 December 31
   2017   2017   2017   2017   2016
Commercial $    7,141   $   3,869   $   2,794   $   1,530   $   2,432
Real estate     5,716       5,545       5,285       5,057       5,022
Mortgage warehousing     -       -       -       -       -
Consumer     3,557       3,456       3,484       3,247       3,229
Total $    16,414   $   12,870   $   11,563   $   9,834   $   10,683
 
  Other Real Estate Owned and Repossessed Assets
  (Dollars in Thousands, Unaudited)
   
  December 31 September 30 June 30 March 31 December 31
   2017   2017   2017   2017   2016
Commercial $    578   $   324   $   409   $   542   $   542
Real estate     200       1,443       1,805       2,413       2,648
Mortgage warehousing     -       -       -       -       -
Consumer     60       26       21       20       26
Total $    838   $   1,793   $   2,235   $   2,975   $   3,216
 

 

 
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
           
      Three Months Ended   Three Months Ended
      December 31, 2017   December 31, 2016
      Average   Average   Average   Average
      Balance Interest Rate   Balance Interest Rate
ASSETS                  
Interest-earning assets              
  Federal funds sold $   10,175   $   24 0.94 %   $   27,034   $   42 0.62 %
  Interest-earning deposits     22,939       49 0.85 %       33,901       73 0.86 %
  Investment securities - taxable     422,864       2,196 2.06 %       496,794       2,221 1.78 %
  Investment securities - non-taxable (1)     309,902       1,875 3.38 %       219,937       1,338 3.36 %
  Loans receivable (2)(3)     2,705,289       32,630 4.82 %       2,154,479       25,715 4.76 %
    Total interest-earning assets (1)     3,471,169       36,774 4.32 %       2,932,145       29,389 4.07 %
                   
Non-interest-earning assets              
  Cash and due from banks     44,765             40,788      
  Allowance for loan losses     (15,692 )           (14,593 )    
  Other assets     341,309             283,410      
                   
      $   3,841,551         $   3,241,750      
                   
LIABILITIES AND SHAREHOLDERS' EQUITY            
Interest-bearing liabilities              
  Interest-bearing deposits $   2,278,651   $   2,586 0.45 %   $   1,949,549   $   1,693 0.35 %
  Borrowings     451,866       2,150 1.89 %       382,177       6,199 6.45 %
  Subordinated debentures     36,431       583 6.35 %       38,084       558 5.83 %
    Total interest-bearing liabilities     2,766,948       5,319 0.76 %       2,369,810       8,450 1.42 %
                   
Non-interest-bearing liabilities              
  Demand deposits     603,733             504,274      
  Accrued interest payable and              
    other liabilities     21,552             24,322      
Stockholders' equity     449,318             343,344      
                   
      $   3,841,551         $   3,241,750      
                   
Net interest income/spread   $   31,455 3.55 %     $   20,939 2.65 %
                   
Net interest income as a percent              
  of average interest earning assets (1)     3.71 %       2.92 %
                   

(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)
 
      Twelve Months Ended   Twelve Months Ended
      December 31, 2017   December 31, 2016
      Average   Average   Average   Average
      Balance Interest Rate   Balance Interest Rate
ASSETS                  
Interest-earning assets              
  Federal funds sold $   5,450   $   80 1.47 %   $   17,142   $   95 0.55 %
  Interest-earning deposits     23,865       301 1.26 %       34,506       278 0.81 %
  Investment securities - taxable     417,993       8,705 2.08 %       490,274       9,666 1.97 %
  Investment securities - non-taxable (1)     292,030       7,068 3.39 %       192,881       4,921 3.59 %
  Loans receivable (2)(3)     2,335,126       112,329 4.83 %       1,948,580       91,569 4.71 %
    Total interest-earning assets (1)     3,074,464       128,483 4.29 %       2,683,383       106,529 4.05 %
                   
Non-interest-earning assets              
  Cash and due from banks     42,578             37,549      
  Allowance for loan losses     (15,226 )           (14,439 )    
  Other assets     295,057             255,129      
                   
      $   3,396,873         $   2,961,622      
                   
LIABILITIES AND SHAREHOLDERS' EQUITY            
Interest-bearing liabilities              
  Interest-bearing deposits $   2,045,896   $   7,901 0.39 %   $   1,752,326   $   6,616 0.38 %
  Borrowings     381,488       6,178 1.62 %       425,444       11,807 2.78 %
  Subordinated debentures     36,362       2,304 6.34 %       49,834       2,114 4.24 %
    Total interest-bearing liabilities     2,463,746       16,383 0.66 %       2,227,604       20,537 0.92 %
                   
Non-interest-bearing liabilities              
  Demand deposits     533,852             417,900      
  Accrued interest payable and              
    other liabilities     20,566             13,574      
Stockholders' equity     378,709             302,544      
                   
      $   3,396,873         $   2,961,622      
                   
Net interest income/spread   $   112,100 3.63 %     $   85,992 3.13 %
                   
Net interest income as a percent              
  of average interest earning assets (1)     3.75 %       3.29 %
                   

(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)
 
  December 31 December 31
   2017   2016 
  (Unaudited)  
Assets    
Cash and due from banks $    76,441   $   70,832  
Investment securities, available for sale     509,665       439,831  
Investment securities, held to maturity (fair value of $201,085 and $194,086)     200,448       193,194  
Loans held for sale     3,094       8,087  
Loans, net of allowance for loan losses of $16,394 and $14,837     2,815,601       2,121,149  
Premises and equipment, net     75,529       66,357  
Federal Reserve and Federal Home Loan Bank stock     18,105       23,932  
Goodwill     119,880       76,941  
Other intangible assets     12,402       9,366  
Interest receivable     16,244       12,713  
Cash value of life insurance     75,931       74,134  
Other assets     40,963       44,620  
   Total assets $    3,964,303   $   3,141,156  
Liabilities    
Deposits    
Non-interest bearing $    601,805   $   496,248  
Interest bearing     2,279,198       1,974,962  
   Total deposits     2,881,003       2,471,210  
Borrowings     564,157       267,489  
Subordinated debentures     37,653       37,456  
Interest payable     886       472  
Other liabilities     23,526       23,674  
   Total liabilities     3,507,225       2,800,301  
Commitments and contingent liabilities    
Stockholders' Equity    
Preferred stock, Authorized, 1,000,000 shares    
Issued 0 and 0 shares     -        -   
Common stock, no par value    
Authorized 66,000,000 shares(1)    
Issued, 25,549,069 and 22,192,530 shares(1)    
Outstanding, 25,529,819 and 22,171,596 shares(1)     -        -   
Additional paid-in capital     275,059       182,326  
Retained earnings     185,570       164,173  
Accumulated other comprehensive loss     (3,551 )     (5,644 )
   Total stockholders' equity     457,078       340,855  
   Total liabilities and stockholders' equity $    3,964,303   $   3,141,156  
     
(1) Adjusted for 3:2 stock split on November 14, 2016    
     


 
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Statements of Income 
(Dollar Amounts in Thousands, Except Per Share Data, Unaudited)
 
  Three Months Ended Twelve Months Ended
  December 31 December 31
   2017  2016  2017  2016 
Interest Income        
Loans receivable $    32,630 $   25,715 $    112,329 $   91,569  
Investment securities        
  Taxable     2,269     2,336     9,086     10,039  
  Tax exempt     1,875     1,338     7,068     4,921  
   Total interest income     36,774     29,389     128,483     106,529  
Interest Expense        
Deposits     2,586     1,693     7,901     6,616  
Borrowed funds     2,150     6,199     6,178     11,807  
Subordinated debentures     583     558     2,304     2,114  
   Total interest expense     5,319     8,450     16,383     20,537  
Net Interest Income     31,455     20,939     112,100     85,992  
Provision for loan losses     1,100     623     2,470     1,842  
Net Interest Income after Provision for Loan Losses     30,355     20,316     109,630     84,150  
Non-interest Income        
Service charges on deposit accounts     1,745     1,452     6,383     5,762  
Wire transfer fees     155     218     658     806  
Interchange fees     1,295     1,100     5,104     4,165  
Fiduciary activities     2,142     1,868     7,894     6,621  
Gains (losses) on sale of investment securities (includes $0 and $961 for the        
  three months ended December 31, 2017 and 2016, respectively, and $38 and $1,836 for        
  the twelve months ended December 31, 2017 and 2016, respectively, related to
  accumulated other comprehensive earnings reclassifications)
    -      961     38     1,836  
Gain on sale of mortgage loans     1,988     2,504     7,906     11,675  
Mortgage servicing income net of impairment     408     552     1,583     1,908  
Increase in cash value of bank owned life insurance     451     498     1,797     1,643  
Other income     1,160     331     1,773     1,039  
   Total non-interest income     9,344     9,484     33,136     35,455  
Non-interest Expense        
Salaries and employee benefits     14,289     11,421     51,375     44,013  
Net occupancy expenses     2,487     2,311     9,535     8,322  
Data processing     1,603     1,512     5,914     5,367  
Professional fees     693     562     2,490     2,752  
Outside services and consultants     2,027     1,880     7,018     7,863  
Loan expense     1,398     1,496     4,970     5,582  
FDIC insurance expense     270     280     1,046     1,559  
Other losses     182     174     368     684  
Other expense     3,342     2,952     12,097     10,750  
   Total non-interest expense     26,291     22,588     94,813     86,892  
Income Before Income Tax      13,408     7,212     47,953     32,713  
                   
Income tax expense (includes $0 and $366 for the three months ended December 31, 2017        
and 2016, respectively, and $13 and $643 for the twelve months ended
December 31, 2017 and 2016, respectively, related to income tax expense from
       
    reclassification items)     5,758     1,609     14,836     8,801  
Net Income      7,650     5,603     33,117     23,912  
Preferred stock dividend     -      -      -      (42 )
Net Income Available to Common Shareholders $    7,650 $   5,603 $    33,117 $   23,870  
Basic Earnings Per Share $    0.30 $   0.25 $    1.44 $   1.19  
Diluted Earnings Per Share     0.30     0.25     1.43     1.19  
         

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