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Horizon Bancorp Announces Record Quarterly Earnings

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MICHIGAN CITY, Ind., April 25, 2018 (GLOBE NEWSWIRE) -- Horizon Bancorp ("Horizon" or the "Company") (NASDAQ:HBNC) today announced its unaudited financial results for the three-month period ended March 31, 2018. 

SUMMARY:

  • Net income for the quarter ended March 31, 2018 was $12.8 million, or $0.50 diluted earnings per share, compared to $8.2 million, or $0.37 diluted earnings per share, for the quarter ended March 31, 2017. This represents the highest quarterly net income and diluted earnings per share in the Company's 145-year history.

  • Return on average assets was 1.32% for the first quarter of 2018 compared to 1.07% for the first quarter of 2017.

  • Return on average equity was 11.29% for the first quarter of 2018 compared to 9.66% for the first quarter of 2017.

  • Total loans increased by an annualized rate of 3.4%, or $23.7 million, during the first quarter of 2018.

  • Consumer loans increased by an annualized rate of 17.6%, or $20.0 million, during the first quarter of 2018.

  • Residential mortgage loans increased by an annualized rate of 7.6%, or $11.4 million, during the first quarter of 2018.

  • Net interest income increased $7.8 million, or 30.7%, to $33.4 million for the three months ended March 31, 2018 compared to $25.6 million for the three months ended March 31, 2017.

  • Net interest margin was 3.81% for the three months ended March 31, 2018 compared to 3.80% for the three months ended March 31, 2017.

  • Horizon's tangible book value per share increased to $12.86 compared to $12.72 and $11.79 at December 31, 2017 and March 31, 2017, respectively. This represents the highest tangible book value per share in the Company's 145-year history.

Craig Dwight, Chairman and CEO, commented: "We are pleased to announce record 2018 first quarter earnings of $0.50 diluted earnings per share. Horizon's net income of $12.8 million was an increase of $4.6 million, or 55.7%, when compared to the prior year. Diluted earnings per share increased $0.13 per share, or 35.1%, to $0.50, for the first quarter of 2018 when compared to the prior year."

Dwight continued, "Horizon's total loans increased at an annualized rate of 3.4% for the first quarter led by consumer and mortgage loan annualized growth of 17.6% and 7.6%, respectively. Our organic loan growth was somewhat tempered during the first quarter of 2018 due to approximately $64.7 million of commercial loan payoffs, the majority of which were expected or requested by Horizon Bank. The Bank originated approximately $116.0 million in commercial loans during the first quarter of 2018; however, only $41.2 million of these loan originations had been funded as of March 31, 2018. Horizon's growth markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo, grew loans by $14.8 million, for an annualized rate of 11.8%, during the first quarter of 2018."

Mr. Dwight concluded, "As expected, Horizon started to fully realize the cost savings from our 2017 acquisitions of Lafayette Community Bancorp and Wolverine Bancorp, Inc. during the first quarter of 2018. Increases in net interest income and non-interest income of $7.6 million and $759,000, respectively, more than offset an increase in non-interest expense of $4.3 million when compared to the prior year helping to improve our efficiency ratio to 61.92% for the first quarter of 2018 compared to 64.97% for the same period in the prior year. Given that the first quarter is typically Horizon's seasonally slow period, we expect continued growth and further improvement in our efficiency during the year."

Income Statement Highlights

Net income for the first quarter of 2018 was $12.8 million, or $0.50 diluted earnings per share, compared to $7.6 million, or $0.30 diluted earnings per share, for the fourth quarter of 2017 and $8.2 million, or $0.37 diluted earnings per share, for the first quarter of 2017. Excluding acquisition-related expenses, gain on sale of investment securities, gain on the accounting for Horizon's equity interest in Lafayette Community Bancorp, tax reform bill impact and purchase accounting adjustments ("core net income"), net income for the first quarter of 2018 was $11.2 million, or $0.44 diluted earnings per share, compared to $10.1 million, or $0.40 diluted earnings per share, for the fourth quarter of 2017 and $7.5 million, or $0.34 diluted earnings per share, for the first quarter of 2017.

The increase in net income and diluted earnings per share from the fourth quarter of 2017 to the first quarter of 2018 reflects an increase in net interest income of $2.0 million and decreases in income tax expense of $3.2 million, provision for loan losses of $533,000 and non-interest expense of $454,000, partially offset by a decrease in non-interest income of $1.0 million.

The decrease in non-interest income from the fourth quarter of 2017 to the first quarter of 2018 was due to lower fiduciary fees as ESOP fees were lower during the first quarter of 2018, lower gain on sale of mortgage loans and lower other income as the previous quarter included $530,000 gain on the accounting for Horizon's equity interest in Lafayette Community Bancorp prior to the 2017 merger.

The increase in net income and diluted earnings per share from the first quarter of 2017 to the same 2018 period reflects an increase in net interest income of $7.8 million, an increase in non-interest income of $759,000 and a decrease in income tax expense of $531,000, partially offset by increases in non-interest expense of $4.3 million and provision for loan losses of $237,000. The increase in diluted earnings per share was due to an increase in net income of $4.6 million when compared to the prior year, offset by an increase in average diluted shares outstanding  as a result of issuing shares as part of the consideration for the acquisitions of Lafayette Community Bancorp and Wolverine Bancorp, Inc.

 
Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share
(Dollars in Thousands, Except per Share Data, Unaudited)
  Three Months Ended
  March 31   December 31   March 31
    2018       2017       2017  
Non-GAAP Reconciliation of Net Income          
Net income as reported $   12,804     $   7,650     $   8,224  
Merger expenses     -          1,444         -   
Tax effect     -          (418 )       -   
Net income excluding merger expenses     12,804         8,676         8,224  
           
Gain on sale of investment securities     (11 )       -          (35 )
Tax effect     2         -          12  
Net income excluding gain on sale of investment securities     12,795         8,676         8,201  
           
Gain on remeasurement of equity interest in Lafayette     -          (530 )       -   
Tax effect     -          78         -   
Net income excluding gain on remeasurement of
  equity interest in Lafayette
    12,795         8,224         8,201  
           
Tax reform bill impact     -          2,426         -   
Net income excluding tax reform bill impact     12,795         10,650         8,201  
           
Acquisition-related purchase accounting adjustments ("PAUs")     (2,037 )       (868 )       (1,016 )
Tax effect     428         304         356  
Core Net Income $   11,186     $   10,086     $   7,541  
           
Non-GAAP Reconciliation of Diluted Earnings per Share          
Diluted earnings per share ("EPS") as reported $   0.50     $   0.30     $   0.37  
Merger expenses     -          0.06         -   
Tax effect     -          (0.02 )       -   
Diluted EPS excluding merger expenses     0.50         0.34         0.37  
           
Gain on sale of investment securities     -          -          -   
Tax effect     -          -          -   
Diluted EPS excluding gain on sale of investment securities     0.50         0.34         0.37  
           
Gain on remeasurement of equity interest in Lafayette     -          (0.02 )       -   
Tax effect     -          -          -   
Diluted EPS excluding gain on remeasurement of
  equity interest in Lafayette
    0.50         0.32         0.37  
           
Tax reform bill impact     -          0.10         -   
Diluted EPS excluding tax reform bill impact     0.50         0.42         0.37  
           
Acquisition-related PAUs     (0.08 )       (0.03 )       (0.05 )
Tax effect     0.02         0.01         0.02  
Core Diluted EPS $   0.44     $   0.40     $   0.34  
           

Horizon's net interest margin increased to 3.81% for the first quarter of 2018 when compared to 3.71% for the fourth quarter of 2017 and 3.80% for the first quarter of 2017. The increase in net interest margin from the fourth quarter of 2017 reflects an increase in the yield of interest-earning assets of 18 basis points, offset by an increase in the cost of interest-bearing liabilities of nine basis points. The increase in the yield of interest-earning assets was due to an increase in the yield on loans receivable and non-taxable investment securities of 22 and 18 basis points, respectively. The increase in the cost of interest-bearing liabilities was due to an increase in the cost of interest-bearing deposits and borrowings of six and nine basis points, respectively.

The increase in net interest margin from the first quarter of 2017 reflects an increase in the yield of interest-earning assets of 22 basis points, offset by an increase in the cost of interest-bearing liabilities of 26 basis points. The increase in yield of interest-earning assets was due to an increase in the yield on loans receivable of 25 basis points. The increase in cost of interest-bearing liabilities was due to increases in the cost of interest-bearing deposits and borrowings of 15 and 46 basis points, respectively.

Excluding acquisition-related purchase accounting adjustments ("core net interest margin"), the margin was 3.55% for the first quarter of 2018 compared to 3.61% for the prior quarter and 3.66% for the first quarter of 2017. The decrease in core net interest margin was due to an increased cost of funding when comparing the periods. Interest income from acquisition-related purchase accounting adjustments was $2.0 million, $868,000 and $1.0 million for the three months ended March 31, 2018, December 31, 2017 and March 31, 2017, respectively.

 
Non-GAAP Reconciliation of Net Interest Margin  
(Dollars in Thousands, Unaudited)  
  Three Months Ended  
  March 31   December 31   March 31  
    2018       2017       2017    
Non-GAAP Reconciliation of Net Interest Margin            
Net interest income as reported $   33,411     $   31,455     $   25,568    
             
Average interest-earning assets     3,580,143         3,471,169         2,797,429    
             
Net interest income as a percentage of average interest-earning assets
  ("Net Interest Margin")
  3.81 %     3.71 %     3.80 %  
       
Acquisition-related purchase accounting adjustments ("PAUs")     (2,037 )       (868 )       (1,016 )  
             
Core net interest income     31,374         30,587         24,552    
             
Core net interest margin   3.55 %     3.61 %     3.66 %  
       

Lending Activity

Total loans increased $23.7 million from $2.835 billion as of December 31, 2017 to $2.859 billion as of March 31, 2018 as consumer loans increased by $20.0 million, residential mortgage loans increased by $11.4 million and mortgage warehouse loans increased by $6.8 million. These increases were offset by a decrease in commercial loans of $13.4 million from December 31, 2017. During the first quarter of 2018, $64.7 million in commercial loan payoffs occurred, the majority of which were either expected or requested by the Bank. The Bank originated approximately $116.0 million in commercial loans during the first quarter of 2018; however, only $41.2 million of these loans funded as of March 31, 2018.

 
Loan Growth by Type, Excluding Acquired Loans
(Dollars in Thousands, Unaudited)
   
  March 31   December 31   Amount   Percent
    2018     2017   Change   Change
Commercial $   1,656,374   $   1,669,728   $   (13,354 )   -0.8 %
Residential mortgage     618,131       606,760       11,371     1.9 %
Consumer     480,989       460,999       19,990     4.3 %
Subtotal     2,755,494       2,737,487       18,007     0.7 %
Held for sale loans     1,973       3,094       (1,121 )   -36.2 %
Mortgage warehouse loans     101,299       94,508       6,791     7.2 %
Total loans $   2,858,766   $   2,835,089   $   23,677     0.8 %
                         

Residential mortgage lending activity for the three months ended March 31, 2018 generated $1.4 million in income from the gain on sale of mortgage loans, a decrease of $565,000 from the fourth quarter of 2017 and a decrease of $491,000 from the first quarter of 2017. Total origination volume for the first quarter of 2018, including loans placed into portfolio, totaled $72.3 million, representing a decrease of 19.8% from the fourth quarter of 2017 and an increase of 9.7% from the first quarter of 2017. Revenue derived from Horizon's residential mortgage lending activities was only 5.4% of Horizon's total revenue for the first quarter of 2018.  

Purchase money mortgage originations during the first quarter of 2018 represented 76.6% of total originations compared to 73.7% of total originations during the fourth quarter of 2017 and 69.8% during the first quarter of 2017.

The provision for loan losses totaled $567,000 for the first quarter of 2018 compared to $1.1 million for the fourth quarter of 2017 and $330,000 for the first quarter of 2017. The decrease in the provision for loan losses from the fourth quarter of 2017 to the first quarter of 2018 was due to the reduction in total commercial loans and good credit quality. The increase in the provision for loan losses from the first quarter of 2017 to the first quarter of 2018 was due to additional general and non-specific allocations for loan growth in new markets and an increase in allocation for other economic factors during 2018.

The ratio of the allowance for loan losses to total loans remained at 0.58% as of March 31, 2018 when compared to December 31, 2017 and decreased from 0.70% as of March 31, 2017 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 0.77% as of March 31, 2018 compared to 0.81% as of December 31, 2017. Loan loss reserves and credit-related loan discounts on acquired loans as a percentage of total loans was 1.15% as of March 31, 2018 compared to 1.23% as of December 31, 2017.

   
Non-GAAP Allowance for Loan and Lease Loss Detail  
As of March 31, 2018  
(Dollars in Thousands, Unaudited)  
                     
  Pre-discount
Loan
Balance
  Allowance
for Loan
Losses
(ALLL)
  Loan
Discount
  ALLL
+
Loan
Discount
  Loans, net   ALLL/
Pre-discount
Loan Balance
  Loan
Discount/
Pre-discount
Loan Balance
  ALLL + Loan
Discount/
Pre-discount
Loan Balance
 
Horizon Legacy $   2,152,002   $   16,474    N/A    $   16,474   $   2,135,528   0.77 %   0.00 %   0.77 %  
Heartland     10,848       -       742       742       10,106   0.00 %   6.84 %   6.84 %  
Summit     35,397       -       2,147       2,147       33,250   0.00 %   6.07 %   6.07 %  
Peoples     105,363       -       2,609       2,609       102,754   0.00 %   2.48 %   2.48 %  
Kosciusko     52,298       -       664       664       51,634   0.00 %   1.27 %   1.27 %  
LaPorte     121,265       -       3,445       3,445       117,820   0.00 %   2.84 %   2.84 %  
CNB     5,561       -       152       152       5,409   0.00 %   2.73 %   2.73 %  
Lafayette     118,829       -       2,170       2,170       116,659   0.00 %   1.83 %   1.83 %  
Wolverine     257,203       -       4,346       4,346       252,857   0.00 %   1.69 %   1.69 %  
Total $   2,858,766   $   16,474   $   16,275   $   32,749   $   2,826,017   0.58 %   0.57 %   1.15 %  
                       

As of March 31, 2018, non-performing loans totaled $15.1 million, which reflects a five basis point decrease in non-performing loans to total loans, or a $1.3 million decline from $16.4 million in non-performing loans as of December 31, 2017. Compared to December 31, 2017, non-performing commercial loans decreased by $576,000, non-performing real estate loans decreased by $440,000 and non-performing consumer loans decreased by $317,000. 

Expense Management

Total non-interest expense was $454,000 lower in the first quarter of 2018 when compared to the fourth quarter of 2017; however, excluding merger-related expenses of $1.4 million for the three months ended December 31, 2017, total non-interest expense increased $990,000, or 4.0%. The increase in non-interest expense, after excluding merger-related expenses, was due to increases in salaries and employee benefits, net occupancy, data processing and other expense.

Salaries and employee benefits expense was $284,000 higher during the first quarter of 2018 when compared to the fourth quarter of 2017, when adjusted for merger-related expenses, due to higher employment and unemployment taxes, health insurance, 401K and supplemental employee retirement plan match expenses. Employment and unemployment taxes and health insurance expense is typically higher during the first quarter of the year due to the nature of these expenses. Expenses related to the Company's match on 401K and supplemental employee retirement plans were higher during the first quarter as a result of the 2017 bonuses paid in March 2018. Net occupancy expense, adjusted for merger-related expenses, was $499,000 higher during the first quarter of 2018 when compared to the fourth quarter of 2017 due to an increase in snow removal costs and market expansions. Data processing and other expense increased $124,000 and $177,000, respectively, when adjusted for merger-related expenses, due to market expansions and recent acquisitions. These increases were offset by a decrease in loan expense of $141,000 due to a decrease in collection-related expenses when comparing the first quarter of 2018 to the fourth quarter of 2017.

Total non-interest expense was $4.3 million higher in the first quarter of 2018 compared to the same period of 2017. The increase was primarily due to an increase in salaries and employee benefits of $2.7 million, other expenses of $526,000, net occupancy expenses of $514,000, data processing expenses of $389,000 and loan expense of $150,000. The increase in salaries and employee benefits reflects overall company growth and recent acquisitions. Other expense and data processing increased as a result of market expansions and acquisitions. Net occupancy expense increased due to increased snow removal costs incurred in 2018, along with market expansions and acquisitions. Loan expense increased due to a higher level of loan originations in the first quarter of 2018 when compared to the same period of 2017.

Income tax expense totaled $2.5 million for the first quarter of 2018, a decrease of $3.2 million and $531,000 when compared to the fourth quarter and first quarter of 2017, respectively. The decrease 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.

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, the return on average assets and the return on average equity. 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)
                 
  March 31   December 31   September 30   June 30   March 31
    2018     2017     2017     2017     2017
Total stockholders' equity $   460,416   $   457,078   $   392,055   $   357,259   $   348,575
Less: Intangible assets     131,724       132,282       103,244       86,726       87,094
Total tangible stockholders' equity $   328,692   $   324,796   $   288,811   $   270,533   $   261,481
                   
Common shares outstanding     25,555,235       25,529,819       23,325,459       22,176,465       22,176,465
                   
Tangible book value per common share $   12.86   $   12.72   $   12.38   $   12.20   $   11.79

 

 
Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity
(Dollars in Thousands, Unaudited)
  Three Months Ended
  March 31   December 31   March 31
    2018       2017       2017  
Non-GAAP Reconciliation of Return on Average Assets          
Average Assets $   3,942,837     $   3,841,551     $   3,103,468  
           
Return on average assets ("ROAA") as reported   1.32 %     0.79 %     1.07 %
Merger expenses   0.00 %     0.15 %     0.00 %
Tax effect   0.00 %     -0.04 %     0.00 %
ROAA excluding merger expenses   1.32 %     0.90 %     1.07 %
           
Gain on sale of investment securities   0.00 %     0.00 %     0.00 %
Tax effect   0.00 %     0.00 %     0.00 %
ROAA excluding gain on sale of investment securities   1.32 %     0.90 %     1.07 %
           
Gain on remeasurement of equity interest in Lafayette   0.00 %     -0.05 %     0.00 %
Tax effect   0.00 %     0.01 %     0.00 %
ROAA excluding gain on remeasurement of equity
  interest in Lafayette
  1.32 %     0.86 %     1.07 %
           
Tax reform bill impact   0.00 %     0.25 %     0.00 %
ROAA excluding tax reform bill impact   1.32 %     1.11 %     1.07 %
           
Acquisition-related purchase accounting adjustments (PAUs)   -0.21 %     -0.09 %     -0.13 %
Tax effect   0.04 %     0.03 %     0.05 %
Core ROAA   1.15 %     1.05 %     0.99 %
           
Non-GAAP Reconciliation of Return on Average Common Equity          
Average Common Equity $   460,076     $   449,318     $   345,092  
           
Return on average common equity ("ROACE") as reported   11.29 %     6.75 %     9.66 %
Merger expenses   0.00 %     1.28 %     0.00 %
Tax effect   0.00 %     -0.37 %     0.00 %
ROACE excluding merger expenses   11.29 %     7.66 %     9.66 %
           
Gain on sale of investment securities   -0.01 %     0.00 %     -0.04 %
Tax effect   0.00 %     0.00 %     0.01 %
ROACE excluding gain on sale of investment securities   11.28 %     7.66 %     9.63 %
           
Gain on remeasurement of equity interest in Lafayette   0.00 %     -0.47 %     0.00 %
Tax effect   0.00 %     0.07 %     0.00 %
ROACE excluding gain on remeasurement of equity
  interest in Lafayette
  11.28 %     7.26 %     9.63 %
           
Tax reform bill impact   0.00 %     2.14 %     0.00 %
ROACE excluding tax reform bill impact   11.28 %     9.40 %     9.63 %
           
Acquisition-related purchase accounting adjustments ("PAUs")   -1.80 %     -0.77 %     -1.19 %
Tax effect   0.38 %     0.27 %     0.42 %
Core ROACE   9.86 %     8.90 %     8.86 %
           

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)
                 
  March 31   December 31   September 30   June 30   March 31
    2018       2017       2017       2017       2017  
Balance sheet:                  
Total assets $   3,969,750     $   3,964,303     $   3,519,501     $   3,321,178     $   3,169,643  
Investment securities     714,425         710,113         708,449         704,525         673,090  
Commercial loans     1,656,374         1,669,728         1,322,953         1,190,502         1,148,277  
Mortgage warehouse loans     101,299         94,508         95,483         123,757         89,360  
Residential mortgage loans     618,131         606,760         571,062         549,997         533,646  
Consumer loans     480,989         460,999         436,327         403,468         375,670  
Earnings assets     3,591,296         3,563,307         3,153,230         2,990,924         2,845,922  
Non-interest bearing deposit accounts     602,175         601,805         563,536         508,305         502,400  
Interest bearing transaction accounts     1,619,859         1,712,246         1,536,169         1,401,407         1,432,228  
Time deposits     711,642         566,952         508,570         452,208         509,071  
Borrowings     520,300         564,157         458,152         485,304         319,993  
Subordinated debentures     37,699         37,653         37,607         37,562         37,516  
Total stockholders' equity     460,416         457,078         392,055         357,259         348,575  
                 
  Three months ended
Income statement:  
Net interest income $   33,411     $   31,455     $   27,879     $   27,198     $   25,568  
Provision for loan losses     567         1,100         710         330         330  
Non-interest income     8,318         9,344         8,021         8,212         7,559  
Non-interest expenses     25,837         26,291         24,513         22,488         21,521  
Income tax expense     2,521         5,758         2,506         3,520         3,052  
Net income $   12,804     $   7,650     $   8,171     $   9,072     $   8,224  
                 
Per share data:                  
Basic earnings per share $   0.50     $   0.30     $   0.36     $   0.41     $   0.37  
Diluted earnings per share     0.50         0.30         0.36         0.41         0.37  
Cash dividends declared per common share     0.15         0.13         0.13         0.13         0.11  
Book value per common share     18.02         17.90         16.81         16.11         15.72  
Tangible book value per common share     12.86         12.72         12.38         12.20         11.79  
Market value - high     30.88         29.21         29.17         27.50         28.09  
Market value - low $   26.80     $   25.99     $   25.30     $   24.73     $   24.91  
Weighted average shares outstanding - Basic     25,537,597         25,140,800         22,580,160         22,176,465         22,175,526  
Weighted average shares outstanding - Diluted     25,645,874         25,264,675         22,715,273         22,322,390         22,326,071  
                 
Key ratios:                  
Return on average assets   1.32 %     0.79 %     0.96 %     1.12 %     1.07 %
Return on average common stockholders' equity     11.29         6.75         8.92         10.24         9.66  
Net interest margin     3.81         3.71         3.71         3.84         3.80  
Loan loss reserve to total loans     0.58         0.58         0.64         0.66         0.70  
Average equity to average assets     11.67         11.70         10.74         10.94         11.12  
Bank only capital ratios:                  
Tier 1 capital to average assets     9.66         9.89         9.90         9.77         10.13  
Tier 1 capital to risk weighted assets     12.32         12.29         12.33         12.69         13.22  
Total capital to risk weighted assets     12.87         12.85         12.93         13.31         13.87  
                 
Loan data:                  
Substandard loans $   43,035     $   46,162     $   36,883     $   34,870     $   30,865  
30 to 89 days delinquent     8,932         9,329         6,284         4,555         5,476  
                   
90 days and greater delinquent - accruing interest $   30     $   167     $   162     $   160     $   245  
Trouble debt restructures - accruing interest     1,899         1,958         2,015         1,924         1,647  
Trouble debt restructures - non-accrual     1,090         1,013         1,192         668         998  
Non-accrual loans     12,062         13,276         9,065         8,811         6,944  
Total non-performing loans $   15,081     $   16,414     $   12,434     $   11,563     $   9,834  
Non-performing loans to total loans   0.53 %     0.58 %     0.51 %     0.51 %     0.46 %


 
HORIZON BANCORP
 
Allocation of the Allowance for Loan and Lease Losses
(Dollars in Thousands, Unaudited)
                 
  March 31   December 31   September 30   June 30   March 31
    2018       2017       2017       2017       2017  
Commercial $    7,840     $   9,093     $   8,335     $   8,312     $   8,071  
Real estate     1,930         2,188         2,129         2,129         1,697  
Mortgage warehousing     1,030         1,030         1,048         1,048         1,042  
Consumer     5,674         4,083         4,074         4,097         4,244  
Total $    16,474     $   16,394     $   15,586     $   15,586     $   15,054  
                 
 
Net Charge-Offs (Recoveries)
(Dollars in Thousands, Unaudited)
                 
  Three Months Ended
  March 31   December 31   September 30   June 30   March 31
    2018       2017       2017       2017       2017  
Commercial $    (38 )   $   84     $   158     $   219     $   (130 )
Real estate     6         (9 )       24         (8 )       38  
Mortgage warehousing     -         -         -         -         -  
Consumer     519         217         (31 )       146         205  
Total $    487     $   292     $   151     $   357     $   113  
Percent of net charge-offs to average
  loans outstanding for the period
  0.02 %     0.01 %     0.01 %     0.02 %     0.01 %
                 
 
Total Non-performing Loans
(Dollars in Thousands, Unaudited)
                 
  March 31   December 31   September 30   June 30   March 31
    2018       2017       2017       2017       2017  
Commercial $    6,778     $   7,354     $   3,582     $   3,033     $   1,783  
Real estate     5,276         5,716         5,545         5,285         5,057  
Mortgage warehousing     -         -         -         -         -  
Consumer     3,027         3,344         3,307         3,245         2,994  
Total $    15,081     $   16,414     $   12,434     $   11,563     $   9,834  
Non-performing loans to total loans   0.53 %     0.58 %     0.51 %     0.51 %     0.46 %
                 
 
Other Real Estate Owned and Repossessed Assets
(Dollars in Thousands, Unaudited)
                 
  March 31   December 31   September 30   June 30   March 31
    2018       2017       2017       2017       2017  
Commercial $    547     $   578     $   324     $   409     $   542  
Real estate     281         200         1,443         1,805         2,413  
Mortgage warehousing     -         -         -         -         -  
Consumer     42         60         26         21         20  
Total $    870     $   838     $   1,793     $   2,235     $   2,975  
                 

 




 
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
 
  Three Months Ended   Three Months Ended
  March 31, 2018   March 31, 2017
  Average
Balance
  Interest   Average
Rate
  Average
Balance
  Interest   Average
Rate
  Assets  
  Interest-earning assets  
  Federal funds sold $   3,714     $   14   1.53 %   $   3,034     $   5   0.67 %
  Interest-earning deposits     22,962         90   1.59 %       24,748         69   1.13 %
  Investment securities - taxable     421,068         2,326   2.24 %       398,871         2,332   2.37 %
  Investment securities - non-taxable(1)     307,921         1,865   2.88 %       270,522         1,637   3.41 %
  Loans receivable(2)(3)     2,824,478         35,131   5.04 %       2,100,254         24,791   4.79 %
  Total interest-earning assets(1)     3,580,143         39,426   4.50 %       2,797,429         28,834   4.28 %
 
  Non-interest-earning assets  
  Cash and due from banks     43,809         40,994    
  Allowance for loan losses     (16,342 )       (14,937 )  
  Other assets     335,227         279,982    
 
  Total average assets $   3,942,837     $   3,103,468    
 
  Liabilities and Stockholders' Equity  
  Interest-bearing liabilities  
  Interest-bearing deposits $   2,304,829     $   2,871   0.51 %   $   1,960,337     $   1,753   0.36 %
  Borrowings     528,066         2,572   1.98 %       249,923         937   1.52 %
  Subordinated debentures     36,477         572   6.36 %       36,290         576   6.44 %
  Total interest-bearing liabilities     2,869,372         6,015   0.85 %       2,246,550         3,266   0.59 %
 
  Non-interest-bearing liabilities  
  Demand deposits     595,644         491,154    
  Accrued interest payable and other liabilities     17,745         20,672    
  Stockholders' equity     460,076         345,092    
 
  Total average liabilities and stockholders' equity $   3,942,837     $   3,103,468    
 
  Net interest income/spread   $   33,411   3.65 %   $   25,568   3.69 %
  Net interest income as a percentage of average
  interest-earning assets(1)
  3.81 %   3.80 %
 
(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. The average rate is presented on a tax equivalent basis.



 
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)
 
  March 31   December 31
    2018       2017  
  (Unaudited)    
Assets      
Cash and due from banks $    63,591     $   76,441  
Investment securities, available for sale     507,736         509,665  
Investment securities, held to maturity (fair value of $203,896 and $201,085)     206,689         200,448  
Loans held for sale     1,973         3,094  
Loans, net of allowance for loan losses of $16,474 and $16,394     2,840,319         2,815,601  
Premises and equipment, net     75,408         75,529  
Federal Home Loan Bank stock     18,105         18,105  
Goodwill     119,880         119,880  
Other intangible assets     11,844         12,402  
Interest receivable     12,044         16,244  
Cash value of life insurance     76,366         75,931  
Other assets     35,795         40,963  
Total assets $    3,969,750     $   3,964,303  
Liabilities      
Deposits      
Non-interest bearing $    602,175     $   601,805  
Interest bearing     2,331,501         2,279,198  
Total deposits     2,933,676         2,881,003  
Borrowings     520,300         564,157  
Subordinated debentures     37,699         37,653  
Interest payable     1,216         886  
Other liabilities     16,443         23,526  
Total liabilities     3,509,334         3,507,225  
Commitments and contingent liabilities      
Stockholders' Equity      
Preferred stock, Authorized, 1,000,000 shares, Issued 0 shares     -          -   
Common stock, no par value, Authorized 66,000,000 shares      
Issued, 25,580,304 and 25,549,069 shares,
Outstanding 25,555,235 and 25,529,819 shares
    -          -   
Additional paid-in capital     275,302         275,059  
Retained earnings     195,292         185,570  
Accumulated other comprehensive loss     (10,178 )       (3,551 )
Total stockholders' equity     460,416         457,078  
Total liabilities and stockholders' equity $    3,969,750     $   3,964,303  
       

 

 
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Statements of Income 
(Dollar Amounts in Thousands, Except Per Share Data, Unaudited)
 
  Three Months Ended
  March 31
    2018     2017
Interest Income      
Loans receivable $    35,131   $   24,791
Investment securities      
Taxable     2,430       2,406
Tax exempt     1,865       1,637
Total interest income     39,426       28,834
Interest Expense      
Deposits     2,871       1,753
Borrowed funds     2,572       937
Subordinated debentures     572       576
Total interest expense     6,015       3,266
Net Interest Income     33,411       25,568
Provision for loan losses     567       330
Net Interest Income after Provision for Loan Losses     32,844       25,238
Non-interest Income      
Service charges on deposit accounts     1,888       1,400
Wire transfer fees     150       150
Interchange fees     1,328       1,176
Fiduciary activities     1,925       1,922
Gains (losses) on sale of investment securities (includes       
$11 and $35 for the three months ended March 31, 2018 and
2017, respectively, related to accumulated other comprehensive
earnings reclassifications)
    11       35
Gain on sale of mortgage loans     1,423       1,914
Mortgage servicing income net of impairment     349       447
Increase in cash value of bank owned life insurance     435       464
Other income     809       51
Total non-interest income     8,318       7,559
Non-interest Expense      
Salaries and employee benefits     14,373       11,709
Net occupancy expenses     2,966       2,452
Data processing     1,696       1,307
Professional fees     501       613
Outside services and consultants     1,264       1,222
Loan expense     1,257       1,107
FDIC insurance expense     310       263
Other losses     146       50
Other expense     3,324       2,798
Total non-interest expense     25,837       21,521
Income Before Income Tax      15,325       11,276
Income tax expense (includes $2 and $12 for the three months ended      
March 31, 2018 and 2017, respectively, related to income tax
expense from reclassification items)
    2,521       3,052
Net Income $    12,804   $   8,224
Basic Earnings Per Share $    0.50   $   0.37
Diluted Earnings Per Share     0.50       0.37
       

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