Exhibit 99.1
Contact: James H. Foglesong
Chief Financial Officer
Phone: (219) 873-2608
Fax: (219) 874-9280
Date: October 23, 2008
FOR IMMEDIATE RELEASE
Horizon Bancorp Announces Third Quarter and Year-to-Date Earnings
Michigan City, Indiana (NASDAQ-GM: HBNC) – Horizon Bancorp today announced its unaudited financial results for the quarter and nine months ended September 30, 2008. Net income for the third quarter of 2008 was $1.3 million or $.41 per fully diluted share. This compares to $2.3 million or $.70 per fully diluted share for the same quarter of the prior year. Year-to-date net income was $6.85 million or $2.11 per fully diluted share compared to $6.13 million or $1.89 per fully diluted share for the same period of the prior year. This represents an 11.7% increase in year-to-date net income.
Craig M. Dwight, Horizon’s Chief Executive Officer stated, “Given the volatile markets and rising unemployment rates, Horizon is extremely proud to report year-to-date earnings ahead of prior year. In addition, Horizon Bank, NA continues to maintain its capital ratios above the regulatory definition for well capitalized banks. Profitable banks with good capital ratios, such as Horizon, are positioned well to take advantage of future opportunities.”
Net interest income for the quarter and nine months ended September 30, 2008 was $9.4 million and $27.7 million, respectively. These represent increases of $1.1 million or 13.9% for the quarter and $3.7 million or 15.6% for the first nine months when compared to the same prior year periods. These increases resulted from an improvement in the net interest margin of 44 basis points to 3.45% for the quarter and 33 basis points to 3.31% for the nine-month period. The improvement resulted primarily from reductions in funding costs that exceeded declines in yields on earning assets. Horizon’s cost of funds has dropped approximately 109 basis points since the third quarter of 2007 while the yield on earning assets declined only 65 basis points. Horizon reduced rates on NOW and money market accounts in line with short-term rate decreases put in place by the Federal Open Market Committee. In addition, a large amount of Certificates of Deposit (CDs) matured during the first half of 2008 and were reinvested at lower rates.
Horizon assesses the adequacy of its Allowance for Loan and Lease Losses (“ALLL”) by regularly reviewing the performance of all of its loan portfolios. As a result of its most recent review, Horizon determined that there had been recent deterioration in the commercial and indirect loan portfolios. As a result, a provision for loan losses of $3.1 million was taken for the third quarter of 2008. This compares to a provision of $1.5 million for the second quarter of 2008 and $550 thousand for the third quarter of 2007. This increase is primarily due to the deterioration of three commercial loans. In addition, Horizon has experienced increased repossessions and voluntary surrenders of vehicles in its indirect loan portfolio. As a result, Horizon has adjusted the historical ratios used to determine the ALLL to reflect these recent trends.
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Pg. 2 Cont. Horizon Announces 3rd Quarter Earnings
For the third quarter of 2008, Horizon’s non-performing loans of approximately $6.6 million were level with the second quarter but increased from the September 30, 2007 level of $2.3 million. Total non-performing loans as of September 30, 2008 were approximately 0.77% of total loans. This compares favorably to national1 and State of Indiana2 bank averages for the same ratio as of June 30, 2008 of 1.73% and 1.62 %, respectively. Net charge-offs for the quarter were $2.4 million compared to $392 thousand for the same quarter of 2007. The current quarter charge-offs related to an increase in commercial and indirect loans. Additionally, Horizon has $1.4 million of other real estate owned, which represent an increase from June 30, 2008 of $724 thousand. Management feels that the total ALLL of $10.525 million or 1.22% of total loans is adequate to absorb probable losses contained in the loan portfolio.
Non-interest income increased $221 thousand or 7.1% from the third quarter of 2007 and has increased $1.5 million or 16.5% for the first nine months of 2008. The quarterly increase relates to an increase in non-sufficient check charges implemented in the first quarter of 2008. Also improving year to date non-interest income was, (a) an increase in fiduciary income due to additional revenue from Horizon’s ESOP management line of business, (b) an increase in gain on sale of loans resulting from an increase in the dollar amount of loans sold and (c) a death benefit received on a bank owned life insurance policy.
Non-interest expense increased $540 thousand or 7.0% from the third quarter of 2007 and $977 thousand or 4.1% for the first nine months. Salaries and benefits decreased due to the staff reduction, which occurred during the third quarter of 2007. Loan expense increased from the prior year due to higher collection expense and less deferred costs on new loans.
The effective tax rate declined to 0% for the third quarter of 2008 compared to 26.7% in the third quarter of 2007. Pre-tax income was almost entirely offset by tax-exempt interest income generated from tax-exempt loans and investments as well as the increase in cash surrender value of officer life insurance. Also during the current quarter, Horizon realized $47 thousand from amended returns filed to claim additional tax benefits related to Horizon’s investment subsidiary.
On September 30, 2008, Horizon’s total assets were $1.189 billion, compared to $1.259 billion on December 31, 2007. Loans declined $32 million since December 31, 2007. The decline was related to the sale of $37 million of adjustable rate mortgage loans. The mortgage loans were sold to reduce Horizon’s reliance on non-core funding and improve bank capital ratios. Commercial and installment loans were down slightly from the previous year-end. These decreases were partially offset by an increase in mortgage warehouse loans.
Deposits declined $144 million since the end of 2007. The decrease came in both negotiable and high cost, short-term consumer CDs. The deposit fall off was funded by a decline in assets of $70 million, additional borrowings of $70 million, which were at lower rates than the maturing CDs, and an increase of $4 million in equity.
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1 National peer group: Consists of all insured commercial banks having assets between $1 Billion and $3 Billion as reported by the Uniform Bank Performance Report as of June 30, 2008 2 Indiana peer group: Consists of 22 publicly traded banks all head quartered in the State of Indiana as reported by the Uniform Bank Performance Reports as of June 30, 2008.
Pg. 3 Cont. Horizon Announces 3rd Quarter Earnings
Stockholders' equity totaled $75.1 million at September 30, 2008 compared to $70.6 million at December 31, 2007. The increase in stockholders’ equity during the period was the result of net income, offset by a decrease in market value of available for sale securities and dividends declared. At September 30, 2008, the ratio of stockholders' equity to total assets was 6.32% compared to 5.61% at December 31, 2007. Book value per common share at September 30, 2008 was $23.39 compared to $22.04 at December 31, 2007. Horizon’s capital ratios exceed the regulatory well-capitalized minimums.
Other items
Horizon opened its 17th full service office on July 14, 2008. The branch is located at 8590 Broadway, Merrillville, Lake County, Indiana 46410. This is Horizon’s first full service branch location in Lake County.
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 | |
# # #
HORIZON BANCORP
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: | | | Nine Months Ended: | |
| | | Sept. 30, | | | June 30, | | | Sept. 30, | | | Sept. 30, | | | Sept. 30, | |
| | | 2008 | | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| End of period balances: | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,188,631 | | | $ | 1,194,447 | | | $ | 1,194,246 | | | $ | 1,188,631 | | | $ | 1,194,246 | |
| Short term investments | | | 1,186 | | | | 1,378 | | | | 120 | | | | 1,186 | | | | 120 | |
| Investment securities | | | 230,837 | | | | 252,791 | | | | 230,631 | | | | 230,837 | | | | 230,631 | |
| Commercial loans | | | 304,997 | | | | 303,179 | | | | 305,502 | | | | 304,997 | | | | 305,502 | |
| Mortgage warehouse loans | | | 101,992 | | | | 82,865 | | | | 52,539 | | | | 101,992 | | | | 52,539 | |
| Real estate loans | | | 168,058 | | | | 168,940 | | | | 217,716 | | | | 168,058 | | | | 217,716 | |
| Installment loans | | | 282,900 | | | | 283,430 | | | | 277,552 | | | | 282,900 | | | | 277,552 | |
| Earning assets | | | 1,107,428 | | | | 1,115,240 | | | | 1,114,616 | | | | 1,107,428 | | | | 1,114,616 | |
| Non-interest bearing deposit accounts | | | 86,093 | | | | 81,212 | | | | 79,034 | | | | 86,093 | | | | 79,034 | |
| Interest bearing transaction accounts | | | 334,121 | | | | 349,737 | | | | 333,069 | | | | 334,121 | | | | 333,069 | |
| Time deposits | | | 329,208 | | | | 361,307 | | | | 383,741 | | | | 329,208 | | | | 383,741 | |
| Borrowings | | | 328,442 | | | | 293,423 | | | | 266,626 | | | | 328,442 | | | | 266,626 | |
| Subordinated debentures | | | 27,837 | | | | 27,837 | | | | 27,837 | | | | 27,837 | | | | 27,837 | |
| Stockholder’s equity | | | 75,072 | | | | 73,613 | | | | 67,666 | | | | 75,072 | | | | 67,666 | |
| | | | | | | | | | | | | | | | | | | | | |
| Average balances : | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,179,045 | | | $ | 1,190,134 | | | $ | 1,194,146 | | | $ | 1,209,188 | | | $ | 1,174,861 | |
| Short term investments | | | 3,682 | | | | 14,519 | | | | 6,472 | | | | 6,780 | | | | 2,005 | |
| Investment securities | | | 239,304 | | | | 251,433 | | | | 225,541 | | | | 242,118 | | | | 227,109 | |
| Commercial loans | | | 301,810 | | | | 301,710 | | | | 301,255 | | | | 303,669 | | | | 287,342 | |
| Mortgage warehouse loans | | | 85,230 | | | | 77,144 | | | | 61,170 | | | | 78,070 | | | | 75,900 | |
| Real estate loans | | | 167,793 | | | | 169,780 | | | | 219,966 | | | | 178,531 | | | | 224,010 | |
| Installment loans | | | 283,669 | | | | 281,948 | | | | 259,862 | | | | 283,485 | | | | 246,430 | |
| Earning assets | | | 1,101,002 | | | | 1,119,467 | | | | 110,521 | | | | 1,133,142 | | | | 1,096,742 | |
| Non-interest bearing deposit accounts | | | 80,762 | | | | 76,802 | | | | 78,073 | | | | 76,940 | | | | 76,288 | |
| Interest bearing transaction accounts | | | 340,012 | | | | 362,087 | | | | 346,535 | | | | 363,445 | | | | 348,644 | |
| Time deposits | | | 351,888 | | | | 370,390 | | | | 401,247 | | | | 383,727 | | | | 405,816 | |
| Borrowings | | | 296,280 | | | | 270,171 | | | | 258,722 | | | | 275,011 | | | | 214,171 | |
| Subordinated debentures | | | 27,837 | | | | 27,837 | | | | 27,837 | | | | 27,837 | | | | 27,837 | |
| Stockholder’s equity | | | 76,027 | | | | 76,708 | | | | 65,628 | | | | 75,446 | | | | 64,901 | |
| | | | | | | | | | | | | | | | | | | | | |
| Per share data: | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.42 | | | $ | 0.93 | | | $ | 0.63 | | | $ | 2.14 | | | $ | 1.92 | |
| Diluted earnings per share | | | 0.41 | | | | 0.92 | | | | 0.62 | | | | 2.11 | | | | 1.89 | |
| Cash dividends declared per common share | | | 0.17 | | | | 0.17 | | | | 0.15 | | | | 0.49 | | | | 0.44 | |
| Book value per common share | | | 23.39 | | | | 22.94 | | | | 19.77 | | | | 23.39 | | | | 21.13 | |
| Market value - high | | | 25.87 | | | | 23.99 | | | | 28.05 | | | | 25.87 | | | | 28.10 | |
| Market value - low | | | 16.36 | | | | 17.53 | | | | 26.80 | | | | 16.36 | | | | 26.60 | |
| Basic average common shares outstanding | | | 3,209,482 | | | | 3,208,419 | | | | 3,200,259 | | | | 3,208,362 | | | | 3,198,999 | |
| Diluted average common shares outstanding | | | 3,255,409 | | | | 3,238,331 | | | | 3,243,537 | | | | 3,246,208 | | | | 3,241,991 | |
| | | | | | | | | | | | | | | | | | | | | |
| Key ratios: | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.45 | % | | | 1.00 | % | | | 0.76 | % | | | 0.76 | % | | | 0.70 | % |
| Return on average equity | | | 7.01 | | | | 15.59 | | | | 13.84 | | | | 12.13 | | | | 12.63 | |
| Net interest margin | | | 3.45 | | | | 3.40 | | | | 3.01 | | | | 3.31 | | | | 2.98 | |
| Loan loss reserve to loans | | | 1.22 | | | | 1.17 | | | | 1.03 | | | | 1.22 | | | | 1.03 | |
| Non-performing loans to loans | | | 0.77 | | | | .67 | | | | 0.27 | | | | 0.77 | | | | 0.27 | |
| Average equity to average assets | | | 6.45 | | | | 6.45 | | | | 5.50 | | | | 6.24 | | | | 5.52 | |
| Bank only capital ratios: | | | | | | | | | | | | | | | | | | | | |
| Tier 1 capital to average assets | | | 7.65 | % | | | 7.55 | % | | | 7.20 | % | | | 7.65 | % | | | 7.20 | % |
| Tier 1 capital to risk weighted assets | | | 10.04 | | | | 10.13 | | | | 9.76 | | | | 10.04 | | | | 9.76 | |
| Total capital to risk weighted assets | | | 11.22 | | | | 11.24 | | | | 10.77 | | | | 11.22 | | | | 10.77 | |
Allocation of the Allowance for Loan and Lease Losses
(Dollars in Thousands)
| | | | 9-30-2008 | | | | 6-30-2008 | | | | 9-30-2007 | | | | 12-31-2007 | |
| Commercial | | $ | 2,659 | | | $ | 2,686 | | | $ | 2,579 | | | $ | 2,656 | |
| Real estate | | | 1,115 | | | | 878 | | | | 750 | | | | 779 | |
| Mortgage warehousing | | | 1,341 | | | | 1,329 | | | | 1,417 | | | | 1,309 | |
| Installment | | | 5,410 | | | | 4,919 | | | | 3,769 | | | | 5,047 | |
| Unallocated | | | -0- | | | | -0- | | | | 308 | | | | -0- | |
| Total | | $ | 10,525 | | | $ | 9,812 | | | $ | 8,823 | | | $ | 9,791 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | Three months ended 9/30/2008 | | | Three months ended 6-30-2008 | | | Three months ended 9-30-2007 | | | Year ended 12-31-2007 | |
| Commercial | | $ | 1,275 | | | $ | 32 | | | $ | (21 | ) | | $ | (48 | ) |
| Real estate | | | (50 | ) | | | 224 | | | | -0- | | | | 36 | |
| Mortgage warehousing | | | -0- | | | | -0- | | | | -0- | | | | -0- | |
| Installment | | | 1,198 | | | | 1,103 | | | | 413 | | | | 2,027 | |
| Total | | $ | 2,423 | | | $ | 1,359 | | | $ | 392 | | | $ | 2,015 | |
Horizon Bancorp and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)
| | | September 30, 2008 (Unaudited) | | | December 31, 2007 | |
| Assets | | | | | | |
| Cash and due from banks | | $ | 20,527 | | | $ | 19,714 | |
| Interest-bearing demand deposits | | | 1 | | | | 1 | |
| Federal funds sold | | | -0- | | | | 35,314 | |
| Cash and cash equivalents | | | 20,528 | | | | 55,029 | |
| Interest-bearing deposits | | | 1,186 | | | | 249 | |
| Investment securities, available for sale | | | 230,107 | | | | 234,675 | |
| Investment securities, held to maturity | | | 730 | | | | -0- | |
| Loans held for sale | | | 4,834 | | | | 8,413 | |
| Loans, net of allowance for loan losses of $10,525 and $9,791 | | | 847,422 | | | | 879,061 | |
| Premises and equipment | | | 26,424 | | | | 24,607 | |
| Federal Reserve and Federal Home Loan Bank stock | | | 12,625 | | | | 12,625 | |
| Goodwill | | | 5,787 | | | | 5,787 | |
| Other intangible assets | | | 1,829 | | | | 2,068 | |
| Interest receivable | | | 5,518 | | | | 5,897 | |
| Cash value life insurance | | | 22,232 | | | | 22,931 | |
| Deferred tax asset | | | 2,739 | | | | 2,638 | |
| Other assets | | | 6,670 | | | | 4,894 | |
| Total assets | | $ | 1,188,631 | | | $ | 1,258,874 | |
| Liabilities | | | | | | | | |
| Deposits | | | | | | | | |
| Non-interest bearing | | $ | 86,093 | | | $ | 84,097 | |
| Interest bearing | | | 663,329 | | | | 809,567 | |
| Total deposits | | | 749,422 | | | | 893,664 | |
| Borrowings | | | 328,442 | | | | 258,852 | |
| Subordinated debentures | | | 27,837 | | | | 27,837 | |
| Interest payable | | | 1,949 | | | | 2,439 | |
| Other liabilities | | | 5,909 | | | | 5,437 | |
| Total liabilities | | | 1,113,559 | | | | 1,188,229 | |
| | | | | | | | | |
| 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, 5,013,906 and 5,011,656 shares | | | 1,114 | | | | 1,114 | |
| Additional paid-in capital | | | 25,884 | | | | 25,638 | |
| Retained earnings | | | 66,239 | | | | 60,982 | |
| Accumulated other comprehensive income (loss) | | | (1,013 | ) | | | 63 | |
| Less treasury stock, at cost, 1,759,424 shares | | | (17,152 | ) | | | (17,152 | ) |
| Total stockholders’ equity | | | 75,072 | | | | 70,645 | |
| Total liabilities and stockholders’ equity | | $ | 1,188,631 | | | $ | 1,258,874 | |
Horizon Bancorp and Subsidiaries
Condensed Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Per Share Data)
| | | Three Months Ended September 30 | | | Nine Months Ended September 30 | |
| | | 2008 (Unaudited) | | | 2007 (Unaudited) | | | 2008 (Unaudited) | | | 2007 (Unaudited) | |
| Interest Income | | | | | | | | | | | | |
| Loans receivable | | $ | 14,202 | | | $ | 16,330 | | | $ | 43,763 | | | $ | 47,088 | |
| Investment securities | | | | | | | | | | | | | | | | |
| Taxable | | | 2,172 | | | | 1,979 | | | | 6,934 | | | | 6,017 | |
| Tax exempt | | | 791 | | | | 864 | | | | 2,490 | | | | 2,582 | |
| Total interest income | | | 17,165 | | | | 19,173 | | | | 53,187 | | | | 55,687 | |
| | | | | | | | | | | | | | | | | |
| Interest Expense | | | | | | | | | | | | | | | | |
| Deposits | | | 4,261 | | | | 7,296 | | | | 15,552 | | | | 21,677 | |
| Borrowed funds | | | 3,108 | | | | 3,096 | | | | 8,782 | | | | 8,273 | |
| Subordinated debentures | | | 393 | | | | 522 | | | | 1,192 | | | | 1,800 | |
| Total interest expense | | | 7,762 | | | | 10,914 | | | | 25,526 | | | | 31,750 | |
| | | | | | | | | | | | | | | | | |
| Net Interest Income | | | 9,403 | | | | 8,259 | | | | 27,661 | | | | 23,937 | |
| Provision for loan losses | | | 3,137 | | | | 550 | | | | 5,405 | | | | 1,140 | |
| | | | | | | | | | | | | | | | | |
| Net Interest Income after Provision for Loan Losses | | | 6,266 | | | | 7,709 | | | | 22,256 | | | | 22,797 | |
| | | | | | | | | | | | | | | | | |
| Other Income | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | | 1,065 | | | | 896 | | | | 2,975 | | | | 2,515 | |
| Wire transfer fees | | | 155 | | | | 81 | | | | 382 | | | | 266 | |
| Fiduciary activities | | | 911 | | | | 905 | | | | 2,817 | | | | 2,600 | |
| Gain on sale of loans | | | 657 | | | | 658 | | | | 2,122 | | | | 1,808 | |
| Increase in cash surrender value of Bank owned life insurance | | | 252 | | | | 233 | | | | 701 | | | | 696 | |
| Death benefit officer life insurance | | | -0- | | | | -0- | | | | 538 | | | | -0- | |
| Loss on sale of securities | | | -0- | | | | -0- | | | | (15 | ) | | | -0- | |
| Other income | | | 311 | | | | 357 | | | | 942 | | | | 1,098 | |
| Total other income | | | 3,351 | | | | 3,130 | | | | 10,462 | | | | 8,983 | |
| | | | | | | | | | | | | | | | | |
| Other Expenses | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 4,203 | | | | 4,277 | | | | 12,698 | | | | 13,147 | |
| Net occupancy expenses | | | 655 | | | | 606 | | | | 1,944 | | | | 1,777 | |
| Data processing and equipment expenses | | | 462 | | | | 648 | | | | 1,745 | | | | 1,913 | |
| Professional fees | | | 263 | | | | 214 | | | | 803 | | | | 955 | |
| Outside services and consultants | | | 287 | | | | 254 | | | | 821 | | | | 730 | |
| Loan expense | | | 791 | | | | 273 | | | | 2,110 | | | | 820 | |
| Other expenses | | | 1,622 | | | | 1,471 | | | | 4,428 | | | | 4,230 | |
| Total other expenses | | | 8,283 | | | | 7,743 | | | | 24,549 | | | | 23,572 | |
| | | | | | | | | | | | | | | | | |
| Income Before Income Tax | | | 1,334 | | | | 3,096 | | | | 8,169 | | | | 8,208 | |
| Income tax expense | | | 2 | | | | 826 | | | | 1,319 | | | | 2,078 | |
| Net Income | | $ | 1,332 | | | $ | 2,270 | | | $ | 6,850 | | | $ | 6,130 | |
| | | | | | | | | | | | | | | | | |
| Basic Earnings Per Share | | $ | .42 | | | $ | .71 | | | $ | 2.14 | | | $ | 1.92 | |
| | | | | | | | | | | | | | | | | |
| Diluted Earnings Per Share | | $ | .41 | | | $ | .70 | | | $ | 2.11 | | | $ | 1.89 | |
