Exhibit 99.1
Contact: James H. Foglesong
Chief Financial Officer
Phone: (219) 873-2608
Fax: (219) 874-9280
Date: January 25, 2008
Horizon Bancorp Announces Record Earnings for 2007
Michigan City, Indiana (NASDAQ GM: HBNC) – Horizon Bancorp today announced its unaudited financial results for the fourth quarter and year ended December 31, 2007. Net income for 2007 was $8.140 million or $2.51 per fully diluted share compared to $7.484 million or $2.33 per fully diluted share for 2006. This represents an 8.8% increase in annual earnings. Net income for the fourth quarter of 2007 was $2.010 million or $.62 per fully diluted share. This compares to $2.233 million or $.69 per fully diluted share for the same quarter of the prior year and $2.270 million or $.70 per fully diluted share for the third quarter of 2007.
Craig M. Dwight, Horizon’s Chief Executive Officer stated, “We are pleased to report our eighth consecutive year of increased net income. Despite the multiple challenges confronting the banking industry and Horizon’s increased provision for loan losses taken in the fourth quarter, we are extremely proud of the effort put forth by the entire Company to exceed last year’s performance.”
As previously announced in its press release on December 31, 2007 and subsequent 8-K filing with the Securities and Exchange Commission, Horizon increased its provision for loan and lease losses expense by $1.4 million in December 2007. After further analysis, this amount was increased to $1.558 million for December. The total provision expense for loan and lease losses for the fourth quarter of 2007 was $1.928 million, compared $550 thousand in the third quarter. The full year provision was $3.068 million compared to $905 thousand for 2006. The additional provision for 2007 was taken to address credit quality deterioration in two segments of Horizon’s loan portfolio. These include the wholesale mortgage loan and indirect auto loan portfolios.
Horizon’s wholesale mortgage portfolio, at $8.9 million in outstanding balances as of December 31, 2007, represented approximately 1.0% of its total loan portfolio of approximately $889 million as of December 31, 2007. The wholesale mortgage portfolio is the residual balance remaining from a line of business that was closed in June 2007. This portfolio consists primarily of residential, second mortgage, home equity lines of credit and term loans with high loan-to-value ratios.
Pg. 2 Cont. Horizon Announces Record Earnings 2007
Horizon’s indirect auto loan portfolio totaled approximately $169 million in outstanding balances as of December 31, 2007, which is approximately 19.0% of its total loan portfolio. In recent months, Horizon has experienced an increasing trend in repossessions and voluntary surrenders of vehicles, which has caused higher than historical losses in this portfolio. Horizon has not changed its underwriting standards for indirect loans and believes that the increased losses are a result of deteriorating economic conditions.
Based on national charge off statistics and Horizon’s recent loss experience in both of these loan portfolios, management determined that an increase in the provision for loan losses was warranted.
Net interest income for the quarter ended December 31, 2007 was $8.871 million, an increase of $784 thousand over the same quarter of the prior year. This increase included $350 thousand from a loan acquired in the Alliance Bank acquisition. Under purchase accounting, this loan was recorded at a deep discount due to credit issues with the borrower. The loan was paid off in the fourth quarter resulting in the gain. The net interest margin, including the one time gain, was 3.21%. Without the gain the margin would have been approximately 3.08%, an increase of 11 basis points from the fourth quarter of 2006. The margin improvement came as a result of a shift in the mix of earning assets. Higher yielding commercial and installment loans grew while mortgage loans and the investment portfolio declined. Also improving the margin was additional long-term debt, which has a lower rate of interest than the short-term negotiated certificates of deposits these funds replaced.
For 2007, net interest income increased $1.263 million from 2006. An increase of approximately $54 million in average earning assets was the main contributing factor. Net interest income included amounts related to loans acquired at a discount from Alliance Bank, and subsequently paid off, of $350 thousand in 2007 and $399 thousand in 2006.
Non-interest income increased $423 thousand or 14.8% from the fourth quarter of 2006 and has increased $2.134 million or 21.1% for the year over 2006. The main contributing factors were: (a) an increase in the gain on sale of loans, (b) an increase in fiduciary income, (c) an increase in the cash surrender value in bank owned life insurance due to additional insurance added during January 2007, and (d) no losses from the sale of securities. There was no gain on the sale of mortgage servicing rights during 2007. With respect to the gain on sale of loans, Horizon is now selling approximately 77% of its conventional mortgage loan production (excluding construction loans) compared to approximately 54% in the prior year. Total loans sold during 2007 were approximately $135 million compared to approximately $96 million during 2006. Fiduciary income increased due to an increase in assets under administration, additional income from the ESOP line of business and a fee increase implemented in January of 2007. Other non-interest income was down from 2006, due to a decline in fees related to brokering non-conforming mortgage loans.
Non-interest expense decreased $92 thousand from the fourth quarter of 2006 and increased $689 thousand or 2.3% for the year. Incentive compensation accruals for various Horizon employees were reduced during the fourth quarter of 2006, as incentive targets were not met, while normal accruals continued during the fourth quarter of 2007. The adjustment to the incentive accruals in the fourth quarter of 2006 is the main cause of the increase in salaries and employee benefits from the fourth quarter of 2006 compared to the same period of 2007. The staff reductions, which took place earlier in 2007, are now favorably impacting compensation expense as this expense is down from the third quarter of 2007 by $270 thousand or 6.3%. Professional fees declined $217 thousand or 15.7% from 2006 due to a decline in legal fees.
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Pg. 3 Cont. Horizon Announces Record Earnings 2007
On December 31, 2007, Horizon’s total assets were $1.259 billion, compared to $1.222 billion on December 31, 2006. Cash and cash equivalents declined due to a large cash item deposited on the last day of 2006. Horizon’s deposit totals were abnormally high at year-end 2007 due to deposits made by local municipalities near the end of the year. This caused a high level of Federal Funds sold at December 31, 2007. Investment securities decreased as maturities were used to fund loan growth.
Gross loans for 2007 increased $45 million since December 31, 2006. Growth in commercial and installment loans was offset by a decline of $34 million in mortgage warehouse loans. Warehouse loans declined due to a continued slow down in the housing market. For 2007 commercial loans had strong growth, increasing $36.0 million since the previous year-end. The majority of the growth came in nonresidential commercial real estate loans. Consumer loans increased due to indirect loans originated within Horizon’s normal market area, which are held in the portfolio, as well as approximately $24 million of indirect loans originated in the suburban Chicago market. Horizon terminated its Illinois indirect loan operation in October of 2007.
Total deposits have declined since December 31, 2006. Part of this decline relates to unusually large deposits being made by a local municipality near the end of 2006. At December 31, 2006 the deposit from the local municipality totaled approximately $80 million, while at December 31, 2007 deposits from the same municipality only totaled approximately $40 million. Total average deposits for the fourth quarter of 2007 also declined from the fourth quarter of 2006. Horizon has reduced its reliance on short-term public fund certificates of deposit, and alternatively has taken on brokered certificates of deposit with maturities of two to three years and increased its long term borrowings. The cost of these long-term sources of funds is lower than the rates being paid on the public fund certificates of deposit. This also improves the rate sensitivity match between rate sensitive assets and liabilities and provides a more stable, long-term source of funds.
Horizon’s allowance for loan losses at December 31, 2007 was $9.8 million, or 1.10% of gross loans, compared to $8.7 million or 1.04% at December 31, 2006. Non-performing loans at December 31, 2007 were $2.9 million or 0.33% of gross loans, which is up approximately two basis points or $325 thousand from December 31, 2006. Horizon considers the allowance for loan losses to be adequate to cover losses inherent in the loan portfolio as of December 31, 2007.
Stockholders' equity totaled $70.6 million at December 31, 2007 compared to $61.9 million at December 31, 2006. At December 31, 2007, the ratio of stockholders' equity to total assets was 5.61% compared to 5.06% at December 31, 2006. Tangible equity to tangible assets was 5.02% at December 31, 2007 compared to 4.42% at December 31, 2006. Book value per common share at December 31, 2007 increased to $21.72 compared to $19.11 at December 31, 2006.
Other items
Horizon opened its second branch in Valparaiso, Indiana on January 14, 2008. Construction has begun on a full service branch in Merrillville, Indiana which is scheduled to open in the second quarter 2008.
Pg. 4 Cont. Horizon Announces Record Earnings 2007
Horizon Bancorp is a locally owned, independent, commercial bank holding company serving Northern Indiana and Southwest Michigan. Horizon also offers mortgage-banking services throughout the Midwest. Horizon Bancorp may be reached on the World Wide Web at www.accesshorizon.com. Its common stock is traded on the NASDAQ Global Market under the symbol HBNC.
Statements in this press release which express “belief,” “intention,” “expectation,” and similar expressions, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by, and information currently available to, such management. Such statements are inherently uncertain and there can be no
assurance that the underlying assumptions will prove to be accurate. Actual results could differ materially from those contemplated by the forward-looking statements. Any forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
| | Contact: | Horizon Bancorp |
| | | James H. Foglesong |
| | | Chief Financial Officer |
| | | (219) 873 - 2608 |
| | | Fax: (219) 874-9280 |
Financial Highlights
| (Unaudited – dollars in thousands except share and per share data and ratios) |
| (In thousands except per share data and ratios) |
| | | Three Months Ended: | | | Year Ended: | |
| | | Dec. 31, | | | Sept. 30, | | | Dec. 31, | | | Dec. 31, | | | Dec. 31, | |
| | | 2007 | | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | | | | | | | | | | | | | | |
| End of period balances: | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,258,874 | | | $ | 1,194,246 | | | $ | 1,222,430 | | | $ | 1,258,874 | | | $ | 1,222,430 | |
| Investment securities | | | 234,675 | | | | 230,631 | | | | 243,078 | | | | 234,675 | | | | 243,078 | |
| Commercial loans | | | 307,535 | | | | 305,502 | | | | 271,457 | | | | 307,535 | | | | 271,457 | |
| Mortgage warehouse loans | | | 78,225 | | | | 52,539 | | | | 112,267 | | | | 78,225 | | | | 112,267 | |
| Real estate loans | | | 216,019 | | | | 217,716 | | | | 222,235 | | | | 216,019 | | | | 222,210 | |
| Installment loans | | | 287,073 | | | | 277,552 | | | | 237,875 | | | | 287,073 | | | | 238,688 | |
| Non-interest bearing deposit accounts | | | 84,097 | | | | 79,034 | | | | 81,949 | | | | 84,097 | | | | 81,949 | |
| Interest bearing transaction accounts | | | 360,476 | | | | 333,069 | | | | 468,624 | | | | 360,476 | | | | 468,624 | |
| Time deposits | | | 449,091 | | | | 383,741 | | | | 363,400 | | | | 449,091 | | | | 363,400 | |
| Short-term borrowings | | | 46,069 | | | | 78,661 | | | | 83,842 | | | | 46,069 | | | | 83,842 | |
| Long-term borrowings | | | 212,783 | | | | 215,802 | | | | 115,951 | | | | 212,783 | | | | 115,951 | |
| Stockholders’ equity | | | 70,645 | | | | 67,666 | | | | 61,877 | | | | 70,645 | | | | 61,877 | |
| | | | | | | | | | | | | | | | | | | | | |
| Average balances : | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,182,921 | | | $ | 1,194,146 | | | $ | 1,175,760 | | | $ | 1,180,400 | | | $ | 1,118,105 | |
| Investment securities | | | 226,672 | | | | 225,541 | | | | 239,111 | | | | 227,000 | | | | 243,726 | |
| Commercial loans | | | 304,456 | | | | 301,255 | | | | 267,535 | | | | 291,656 | | | | 256,344 | |
| Mortgage warehouse loans | | | 53,599 | | | | 61,170 | | | | 111,336 | | | | 70,279 | | | | 96,334 | |
| Real estate loans | | | 217,731 | | | | 219,966 | | | | 231,027 | | | | 222,428 | | | | 197,778 | |
| Installment loans | | | 281,337 | | | | 259,862 | | | | 236,369 | | | | 255,228 | | | | 220,099 | |
| Non-interest bearing deposit accounts | | | 77,245 | | | | 78,073 | | | | 79,229 | | | | 76,530 | | | | 78,654 | |
| Interest bearing transaction accounts | | | 338,749 | | | | 346,535 | | | | 345,485 | | | | 348,150 | | | | 352,587 | |
| Time deposits | | | 391,817 | | | | 401,247 | | | | 439,393 | | | | 402,287 | | | | 387,365 | |
| Short-term borrowings | | | 67,713 | | | | 70,574 | | | | 87,797 | | | | 62,180 | | | | 53,331 | |
| Long-term borrowings | | | 243,228 | | | | 215,985 | | | | 156,286 | | | | 220,159 | | | | 182,595 | |
| Stockholders’ equity | | | 70,151 | | | | 65,628 | | | | 61,300 | | | | 66,224 | | | | 57,435 | |
| | | | | | | | | | | | | | | | | | | | | |
| Per share data: | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.63 | | | $ | 0.71 | | | $ | 0.70 | | | $ | 2.54 | | | $ | 2.36 | |
| Diluted earnings per share | | | 0.62 | | | | 0.70 | | | | 0.69 | | | | 2.51 | | | | 2.33 | |
| Cash dividends declared per common share | | | 0.15 | | | | 0.15 | | | | 0.14 | | | | 0.59 | | | | 0.56 | |
| Book value per common share | | | 21.72 | | | | 21.13 | | | | 19.11 | | | | 21.72 | | | | 19.11 | |
| Market value - high | | | 26.40 | | | | 28.00 | | | | 27.89 | | | | 28.10 | | | | 32.23 | |
| Market value - low | | | 24.40 | | | | 25.75 | | | | 25.92 | | | | 24.40 | | | | 25.16 | |
| Basic average common shares outstanding | | | 3,204,203 | | | | 3,202,341 | | | | 3,193,306 | | | | 3,200,157 | | | | 3,177,272 | |
| Diluted average common shares outstanding | | | 3,247,331 | | | | 3,242,919 | | | | 3,238,648 | | | | 3,243,282 | | | | 3,217,050 | |
| | | | | | | | | | | | | | | | | | | | | |
| Key ratios: | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.68 | % | | | 0.76 | % | | | 0.75 | % | | | 0.69 | % | | | 0.67 | % |
| Return on average equity | | | 11.46 | | | | 13.84 | | | | 14.57 | | | | 12.29 | | | | 13.03 | |
| Net interest margin | | | 3.21 | | | | 3.01 | | | | 2.97 | | | | 3.03 | | | | 3.05 | |
| Loan loss reserve to loans | | | 1.10 | | | | 1.03 | | | | 1.04 | | | | 1.10 | | | | 1.04 | |
| Non-performing loans to loans | | | 0.33 | | | | .27 | | | | 0.31 | | | | 0.33 | | | | 0.31 | |
| Average equity to average assets | | | 5.93 | | | | 5.50 | | | | 5.21 | | | | 5.61 | | | | 5.14 | |
| Bank only capital ratios: | | | | | | | | | | | | | | | | | | | | |
| Tier 1 capital to average assets | | | 7.29 | % | | | 7.17 | % | | | 6.89 | % | | | 7.29 | % | | | 6.89 | % |
| Tier 1 capital to risk weighted assets | | | 9.49 | | | | 9.74 | | | | 10.16 | | | | 9.49 | | | | 10.16 | |
| Total capital to risk weighted assets | | | 10.56 | | | | 10.75 | | | | 11.26 | | | | 10.56 | | | | 11.26 | |
| Horizon Bancorp and Subsidiaries |
| Condensed Consolidated Balance Sheets |
| (Dollar Amounts in Thousands) |
| | | December 31, 2007 (Unaudited) | | | December 31, 2006 | |
Assets | | | | | | |
| Cash and due from banks | | $ | 19,714 | | | $ | 52,311 | |
| Interest-bearing demand deposits | | | 1 | | | | 1 | |
| Federal funds sold | | | 35,314 | | | | 6,500 | |
| Cash and cash equivalents | | | 55,029 | | | | 58,812 | |
| Interest-bearing deposits | | | 249 | | | | 898 | |
| Investment securities, available for sale | | | 234,675 | | | | 243,078 | |
| Loans held for sale | | | 8,413 | | | | 13,103 | |
| Loans, net of allowance for loan losses of $9,791 and $8,738 | | | 879,061 | | | | 835,096 | |
| Premises and equipment | | | 24,607 | | | | 23,394 | |
| Federal Reserve and Federal Home Loan Bank stock | | | 12,625 | | | | 12,136 | |
| Goodwill | | | 5,787 | | | | 5,787 | |
| Other intangible assets | | | 2,068 | | | | 2,412 | |
| Interest receivable | | | 5,897 | | | | 6,094 | |
| Other assets | | | 30,463 | | | | 21,620 | |
| Total assets | | $ | 1,258,874 | | | $ | 1,222,430 | |
Liabilities | | | | | | | | |
| Deposits | | | | | | | | |
| Noninterest bearing | | $ | 84,097 | | | $ | 81,949 | |
| Interest bearing | | | 809,567 | | | | 832,024 | |
| Total deposits | | | 893,664 | | | | 913,973 | |
| Short-term borrowings | | | 46,069 | | | | 83,842 | |
| Long-term borrowings | | | 212,783 | | | | 115,951 | |
| Subordinated debentures | | | 27,837 | | | | 40,209 | |
| Interest payable | | | 2,439 | | | | 1,771 | |
| Other liabilities | | | 5,437 | | | | 4,807 | |
| Total liabilities | | | 1,188,229 | | | | 1,160,553 | |
Commitments and Contingent Liabilities | | | | | | | | |
Stockholders’ Equity | | | | | | | | |
| Preferred stock, no par value | | | | | | | | |
| Authorized, 1,000,000 shares | | | | | | | | |
| No shares issued | | | | | | | | |
| Common stock, $.2222 stated value | | | | | | | | |
| Authorized, 22,500,000 shares | | | | | | | | |
| Issued, 5,011,656 and 4,998,106 shares | | | 1,114 | | | | 1,111 | |
| Additional paid-in capital | | | 25,638 | | | | 25,229 | |
| Retained earnings | | | 60,982 | | | | 54,196 | |
| Accumulated other comprehensive income (loss) | | | 63 | | | | (1,507 | ) |
| Less treasury stock, at cost, 1,759,424 shares | | | (17,152 | ) | | | (17,152 | ) |
| Total stockholders’ equity | | | 70,645 | | | | 61,877 | |
Total liabilities and stockholders’ equity | | $ | 1,258,874 | | | $ | 1,222,430 | |
| Horizon Bancorp and Subsidiaries |
| Condensed Consolidated Statements of Income |
| (Dollar Amounts in Thousands, Except Per Share Data) |
| | | Three Months Ended December 31 | | | Year | |
| | | 2007 (Unaudited) | | | 2006 | | | 2007 (Unaudited) | | | 2006 | |
Interest Income | | | | | | | | | | | | |
| Loans receivable | | $ | 16,530 | | | $ | 15,670 | | | $ | 63,618 | | | $ | 57,282 | |
| Investment securities | | | | | | | | | | | | | | | | |
| Taxable | | | 2,372 | | | | 2,506 | | | | 8,389 | | | | 8,602 | |
| Tax exempt | | | 479 | | | | 433 | | | | 3,061 | | | | 2,796 | |
| Total interest income | | | 19,381 | | | | 18,609 | | | | 75,068 | | | | 68,680 | |
Interest Expense | | | | | | | | | | | | | | | | |
| Deposits | | | 6,765 | | | | 7,461 | | | | 28,442 | | | | 25,734 | |
| Federal funds purchased and short-term borrowings | | | 611 | | | | 451 | | | | 2,930 | | | | 2,035 | |
| Long-term borrowings | | | 2,621 | | | | 1,987 | | | | 8,575 | | | | 7,100 | |
| Subordinated debentures | | | 513 | | | | 623 | | | | 2,313 | | | | 2,266 | |
| Total interest expense | | | 10,510 | | | | 10,522 | | | | 42,260 | | | | 37,135 | |
Net Interest Income | | | 8,871 | | | | 8,087 | | | | 32,808 | | | | 31,545 | |
| Provision for loan losses | | | 1,928 | | | | 180 | | | | 3,068 | | | | 905 | |
Net Interest Income after Provision for Loan Losses | | | 6,943 | | | | 7,907 | | | | 29,740 | | | | 30,640 | |
Other Income | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | | 954 | | | | 805 | | | | 3,469 | | | | 3,102 | |
| Wire transfer fees | | | 91 | | | | 106 | | | | 357 | | | | 396 | |
| Fiduciary activities | | | 956 | | | | 869 | | | | 3,556 | | | | 3,100 | |
| Gain on sale of loans | | | 758 | | | | 594 | | | | 2,566 | | | | 1,681 | |
| Gain on sale of mortgage servicing rights | | | — | | | | — | | | | — | | | | 656 | |
| Increase in cash surrender value of Bank owned life insurance | | | 224 | | | | 122 | | | | 920 | | | | 470 | |
| Gain (loss) on sale of securities | | | 2 | | | | — | | | | 2 | | | | (764 | ) |
| Other income | | | 303 | | | | 369 | | | | 1,401 | | | | 1,496 | |
| Total other income | | | 3,288 | | | | 2,865 | | | | 12,271 | | | | 10,137 | |
Other Expenses | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 4,007 | | | | 3,909 | | | | 17,154 | | | | 16,433 | |
| Net occupancy expenses | | | 641 | | | | 582 | | | | 2,418 | | | | 2,338 | |
| Data processing and equipment expenses | | | 603 | | | | 536 | | | | 2,516 | | | | 2,560 | |
| Professional fees | | | 214 | | | | 425 | | | | 1,169 | | | | 1,386 | |
| Outside services and consultants | | | 292 | | | | 268 | | | | 1,022 | | | | 1,100 | |
| Loan expense | | | 597 | | | | 648 | | | | 2,106 | | | | 1,952 | |
| Other expenses | | | 1,218 | | | | 1,296 | | | | 4,759 | | | | 4,686 | |
| Total other expenses | | | 7,572 | | | | 7,664 | | | | 31,144 | | | | 30,455 | |
Income Before Income Tax | | | 2,659 | | | | 3,108 | | | | 10,867 | | | | 10,322 | |
| Income tax expense | | | 649 | | | | 875 | | | | 2,727 | | | | 2,838 | |
Net Income | | $ | 2,010 | | | $ | 2,233 | | | $ | 8,140 | | | $ | 7,484 | |
Basic Earnings Per Share | | $ | .63 | | | $ | .70 | | | $ | 2.54 | | | $ | 2.36 | |
Diluted Earnings Per Share | | $ | .62 | | | $ | .69 | | | $ | 2.51 | | | $ | 2.33 | |
