Chief Financial Officer
Phone: (219) 873-2611
Fax: (219) 874-9280
Date: April 25, 2016
FOR IMMEDIATE RELEASE
Horizon Bancorp Announces 2016 First Quarter Earnings
Michigan City, Indiana (NASDAQ GS: HBNC) – Horizon Bancorp today announced its unaudited financial results for the three-month period ended March 31, 2016.
SUMMARY:
| · | Net income for the first quarter of 2016 was $5.4 million or $.44 diluted earnings per share compared to $5.4 million or $.55 diluted earnings per share in the same period of 2015. |
| · | Excluding merger expenses, gain on sale of investment securities, the death benefit on bank owned life insurance and acquisition-related purchase accounting adjustments, net income for the first quarter of 2016 increased 18.7% compared to the same period of 2015 to $5.4 million or $.45 diluted earnings per share. |
| · | Net interest income for the first quarter of 2016 increased $2.9 million or 17.1% compared to the same period in 2015. |
| · | Non-interest income for the first quarter of 2016 increased $798,000 or 11.3% compared to the same period in 2015. |
| · | Net interest margin, excluding the impact of acquisitions (“core net interest margin”), was 3.36% for the first quarter of 2016 compared to 3.38% in the prior quarter and 3.47% for the same period in 2015. |
| · | Non-performing loans to total loans was .87% as of March 31, 2016 compared to .95% as of December 31, 2015 and 1.52% as of March 31, 2015. |
| · | Horizon’s tangible book value per share rose to $17.08 at March 31, 2016, compared to $16.53 at December 31, 2015 and $16.80 at March 31, 2015. |
| · | On February 5, 2016, Horizon announced the pending acquisition of Kosciusko Financial, Inc. (“Kosciusko”) and its wholly-owned subsidiary, Farmers State Bank, headquartered in Mentone, Indiana. |
| · | On March 10, 2016, Horizon announced the pending acquisition of LaPorte Bancorp, Inc. (“LaPorte Bancorp”) and its wholly-owned subsidiary, The LaPorte Savings Bank, headquartered in La Porte, Indiana. |
| · | Horizon paid off the $12.5 million in funds received through the Small Business Lending Fund with cash from the holding company on February 1, 2016. |
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Pg. 2 cont. Horizon Bancorp Announces an Increase in 2016 First Quarter Earnings
| · | Horizon Bank’s capital ratios, including Tier 1 Capital to Average Assets of 9.03% and Total Capital to Risk Weighted Assets of 13.31% as of March 31, 2016, continue to be well above the regulatory standards for well-capitalized banks. |
Craig Dwight, Chairman and CEO, commented: “Horizon made significant progress building for the future in the first quarter of 2016 with the announcement of two acquisitions and by adding employee talent in key growth markets. We believe Horizon is well positioned to take advantage of the growth opportunities in the States of Indiana and Michigan and to successfully integrate our pending acquisitions.”
Dwight continued, “Excluding non-core items, Horizon realized a healthy increase of 18.7% in net income during the first quarter of 2016 compared to the same period of 2015. In addition, Horizon achieved an 11.3% increase in non-interest income, driven by increases in service charges, interchange fees and fiduciary activities. These revenue streams are sustainable drivers of fee income growth and help combat margin pressure and market-driven mortgage revenue volatility. Excluding mortgage-related fee income and non-core items, Horizon’s non-interest income increased 27.7% in the first quarter of 2016 compared to the same period of 2015.”
| Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share | |
| (Dollar in Thousands Except per Share Data, Unaudited) | |
| | | | | | | |
| | | Three Months Ended | |
| | | March 31 | |
| Non-GAAP Reconciliation of Net Income | | 2016 | | | 2015 | |
| Net income as reported | | $ | 5,381 | | | $ | 5,358 | |
| Merger expenses | | | 639 | | | | 146 | |
| Tax effect | | | (165 | ) | | | (51 | ) |
| Net income excluding merger expenses | | | 5,855 | | | | 5,453 | |
| | | | | | | | | |
| Gain on sale of investment securities | | | (108 | ) | | | (124 | ) |
| Tax effect | | | 38 | | | | 43 | |
| Net income excluding gain on sale of investment securities | | | 5,785 | | | | 5,372 | |
| | | | | | | | | |
| Death benefit on bank owned life insurance ("BOLI") | | | - | | | | (145 | ) |
| Tax effect | | | - | | | | 51 | |
| Net income excluding death benefit on BOLI | | | 5,785 | | | | 5,278 | |
| | | | | | | | | |
| Acquisition-related purchase accounting adjustments ("PAUs") | | | (547 | ) | | | (1,083 | ) |
| Tax effect | | | 191 | | | | 379 | |
| Net income excluding PAUs | | $ | 5,429 | | | $ | 4,574 | |
| | | | | | | | | |
| Non-GAAP Reconciliation of Diluted Earnings per Share | |
| Diluted earnings per share as reported | | $ | 0.44 | | | $ | 0.55 | |
| Merger expenses | | | 0.05 | | | | 0.02 | |
| Tax effect | | | (0.01 | ) | | | (0.01 | ) |
| Diluted earnings per share excluding merger expenses | | | 0.48 | | | | 0.56 | |
| | | | | | | | | |
| Gain on sale of investment securities | | | (0.01 | ) | | | (0.01 | ) |
| Tax effect | | | 0.00 | | | | 0.00 | |
| Net income excluding gain on sale of investment securities | | | 0.48 | | | | 0.55 | |
| | | | | | | | | |
| Death benefit on BOLI | | | - | | | | (0.02 | ) |
| Tax effect | | | - | | | | 0.01 | |
| Net income excluding death benefit on BOLI | | | 0.48 | | | | 0.54 | |
| | | | | | | | | |
| Acquisition-related PAUs | | | (0.05 | ) | | | (0.11 | ) |
| Tax effect | | | 0.02 | | | | 0.04 | |
| Diluted earnings per share excluding PAUs | | $ | 0.45 | | | $ | 0.47 | |
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Pg. 3 cont. Horizon Bancorp Announces an Increase in 2016 First Quarter Earnings
Dwight continued, “Loan volume in the first quarter did not meet our expectations and resulted in a decrease in total loans from the prior quarter. The decrease was primarily attributed to three large commercial loan payoffs, seasonal pay downs on agricultural lines of credit, annual agricultural term loan payments and lower mortgage warehouse volume. The commercial payoffs were due to two multi-family real estate loans that were encouraged to refinance elsewhere and one non-owner occupied real estate loan that was refinanced by another institution. The decrease in mortgage warehouse loans was due to seasonality and changes in mortgage compliance that slowed production volume during the quarter. We remain optimistic about future loan growth given the strong commercial loan pipeline and investments in additional lenders. In addition, it is anticipated that mortgage warehouse lending will rebound in the second quarter due to seasonal factors and the slower pace of expected interest rate increases.”
The following table presents the amount and growth rate of loans by product type for the three months ended March 31, 2016.
| Loan Growth by Type | |
| Three Months Ended March 31, 2016 | |
| (Dollars in Thousands) | |
| | | | | | | | | | | | | | | Annualized | |
| | | March 31 | | | December 31 | | | Amount | | | Percent | | | Percent | |
| | | 2016 | | | 2015 | | | Change | | | Change | | | Change | |
| | | (Unaudited) | | | | | | | | | | | | | |
| Commercial loans | | $ | 797,754 | | | $ | 804,995 | | | $ | (7,241 | ) | | | -0.9 | % | | | -3.6 | % |
| Residential mortgage loans | | | 442,806 | | | | 437,144 | | | | 5,662 | | | | 1.3 | % | | | 5.2 | % |
| Consumer loans | | | 359,636 | | | | 362,300 | | | | (2,664 | ) | | | -0.7 | % | | | -3.0 | % |
| Subtotal | | | 1,600,196 | | | | 1,604,439 | | | | (4,243 | ) | | | -0.3 | % | | | -1.1 | % |
| Held for sale loans | | | 3,168 | | | | 7,917 | | | | (4,749 | ) | | | -60.0 | % | | | -241.3 | % |
| Mortgage warehouse loans | | | 119,876 | | | | 144,692 | | | | (24,816 | ) | | | -17.2 | % | | | -69.0 | % |
| Total loans | | $ | 1,723,240 | | | $ | 1,757,048 | | | $ | (33,808 | ) | | | -1.9 | % | | | -7.7 | % |
Horizon’s core net interest margin decreased from 3.38% in the fourth quarter of 2015 and 3.47% in the first quarter of 2015 to 3.36% for the three months ended March 31, 2016. The reduction from year-end is a result of lower growth in higher yielding assets and a continuation of repricing of loans in general.
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Pg. 4 cont. Horizon Bancorp Announces an Increase in 2016 First Quarter Earnings
| Non-GAAP Reconciliation of Net Interest Margin | |
| (Dollar in Thousands) | |
| | | Three Months Ended | |
| | | March 31 | | | December 31 | | | March 31 | |
| Net Interest Margin As Reported | | 2016 | | | 2015 | | | 2015 | |
| | | (Unaudited) | | | | | | (Unaudited) | |
| Net interest income | | $ | 19,774 | | | $ | 20,222 | | | $ | 16,886 | |
| Average interest-earning assets | | | 2,367,250 | | | | 2,369,301 | | | | 1,899,870 | |
| Net interest income as a percent of average interest- | | | | | | | | | | | | |
| earning assets ("Net Interest Margin") | | | 3.45 | % | | | 3.50 | % | | | 3.70 | % |
| | | | | | | | | | | | | |
| Impact of Acquisitions | | | | | | | | | | | | |
| Interest income from acquisition-related | | | | | | | | | | | | |
| purchase accounting adjustments | | $ | (547 | ) | | $ | (695 | ) | | $ | (1,083 | ) |
| | | | | | | | | | | | | |
| Excluding Impact of Acquisitions | | | | | | | | | | | | |
| Net interest income | | $ | 19,227 | | | $ | 19,527 | | | $ | 15,803 | |
| Average interest-earning assets | | | 2,367,250 | | | | 2,369,301 | | | | 1,899,870 | |
| Core Net Interest Margin | | | 3.36 | % | | | 3.38 | % | | | 3.47 | % |
Horizon’s loan loss reserve ratio, excluding loans with credit-related purchase accounting adjustments, stood at .98% as of March 31, 2016.
Non- GAAP Allowance for Loan and Lease Loss Detail | |
| As of March 31, 2016 | |
| (Dollars in Thousands, Unaudited) | |
| | | | | | | | | | | | | | | | |
| | | Horizon | | | | | | | | | | | | | |
| | | Legacy | | | Heartland | | | Summit | | | Peoples | | | Total | |
| Pre-discount loan balance | | $ | 1,454,494 | | | $ | 20,784 | | | $ | 73,204 | | | $ | 179,696 | | | $ | 1,728,178 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses (ALLL) | | | 14,236 | | | | - | | | | - | | | | - | | | | 14,236 | |
| Loan discount | | | N/ | A | | | 1,345 | | | | 2,861 | | | | 3,900 | | | | 8,106 | |
| ALLL+loan discount | | | 14,236 | | | | 1,345 | | | | 2,861 | | | | 3,900 | | | | 22,342 | |
| | | | | | | | | | | | | | | | | | | | | |
| Loans, net | | $ | 1,440,258 | | | $ | 19,439 | | | $ | 70,343 | | | $ | 175,796 | | | $ | 1,705,836 | |
| | | | | | | | | | | | | | | | | | | | | |
| ALLL/ pre-discount loan balance | | | 0.98 | % | | | 0.00 | % | | | 0.00 | % | | | 0.00 | % | | | 0.82 | % |
| Loan discount/ pre-discount loan balance | | | N/ | A | | | 6.47 | % | | | 3.91 | % | | | 2.17 | % | | | 0.47 | % |
| ALLL+loan discount/ pre-discount loan balance | | | 0.98 | % | | | 6.47 | % | | | 3.91 | % | | | 2.17 | % | | | 1.29 | % |
On February 4, 2016, Horizon entered into an agreement to acquire Kosciusko and its wholly-owned subsidiary, Farmers State Bank, in a cash and stock merger. On April 18, 2016, Horizon received all regulatory approvals required to complete the transaction. The acquisition is expected to close in June of 2016, subject to Kosciusko shareholder approval and the satisfaction of other conditions to closing. Farmers State Bank serves the Kosciusko County, Indiana market through five full-service banking locations. As of December 31, 2015, Kosciusko had total assets of $148.1 million.
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Pg. 5 cont. Horizon Bancorp Announces an Increase in 2016 First Quarter Earnings
On March 10, 2016, Horizon entered into an agreement to acquire LaPorte Bancorp and its wholly-owned subsidiary, The LaPorte Savings Bank, in a cash and stock merger. The acquisition is expected to close in the third quarter of 2016, subject to regulatory and LaPorte Bancorp shareholder approval. The LaPorte Savings Bank serves La Porte and Porter Counties, Indiana through seven full-service locations and one loan production office in Saint Joseph, Michigan. As of December 31, 2015, LaPorte Bancorp had total assets of $543.2 million.
Dwight stated, “We are pleased to be partnering with these first-class community banks who will add talent and experience to the Horizon team. LaPorte Bancorp will bolster Horizon’s presence in La Porte and Porter Counties, Indiana while Kosciusko provides growth opportunity in the attractive Warsaw, Indiana market area and complements Horizon’s existing branch network in northeast Indiana. The leadership teams of both organizations have created strong community bank cultures that complement Horizon’s core values and customer focused philosophy. We look forward to welcoming their customers and employees and are excited about the bright future these partnerships provide to our stakeholders. ”
Income Statement Highlights
Net income for the first quarter of 2016 was $5.4 million or $.44 diluted earnings per share compared to $5.4 million or $.55 diluted earnings per share in the first quarter of 2015. The decrease in diluted earnings per share from the previous year reflects an increase in the number of shares outstanding primarily as a result of the Peoples Bancorp acquisition. Excluding acquisition-related expenses and purchase accounting adjustments, gain on sale of investment securities and the death benefit on bank owned life insurance, net income for the first quarter of 2016 was $5.4 million or $.45 diluted earnings per share compared to $4.6 million or $.47 diluted earnings per share in the same period of 2015.
Horizon’s net interest margin was 3.45% during the first quarter of 2016, down from 3.50% for the prior quarter and 3.70% for same period of 2015. The decrease in net interest margin compared to the prior quarter and the same period of 2015 was due to lower yields on new loans and re-pricing earning assets, partially offset by lower rates and a change in mix on interest-bearing liabilities. Excluding acquisition-related purchase accounting adjustments, the margin would have been 3.36% for the first quarter of 2016 compared to 3.38% for the prior quarter and 3.47% for the same period of 2015. Interest income from acquisition-related purchase accounting adjustments was $547,000, $695,000 and $1.1 million for the three months ended March 31, 2016, December 31, 2015 and March 31 2015, respectively.
Residential mortgage lending activity during the first quarter of 2016 generated $2.1 million in income from the gain on sale of mortgage loans, a decrease of $265,000 from the first quarter of 2015. Total origination volume in the first quarter of 2016, including loans placed into portfolio, totaled $79.4 million, representing a decrease of 10.5% from the first quarter of 2015 of $88.7 million. Purchase money mortgage originations during the first quarter of 2016 represented 65.3% of total originations compared to 68.7% of originations during the previous quarter and 50.2% during the first quarter of 2015.
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Pg. 6 cont. Horizon Bancorp Announces an Increase in 2016 First Quarter Earnings
Lending Activity
Total loans, net of allowance for loan losses, decreased $28.8 million from December 31, 2015 to $1.7 billion as of March 31, 2016. During the quarter, mortgage warehouse loans decreased $24.8 million, commercial loans decreased by $7.2 million and consumer loans decreased by $2.7 million, which were partially offset by an increase in residential mortgage loans of $5.7 million. The decrease in mortgage warehouse loans was due to seasonality and changes in mortgage compliance that slowed production volume during the quarter. The decrease in commercial loans was primarily due to three large commercial loan payoffs, seasonal pay downs on agricultural lines of credit and annual agricultural term loan payments.
The provision for loan losses was $532,000 for the three months ended March 31, 2016 compared to $614,000 for the same period of 2015. The lower provision for loan losses for the first quarter of 2016 compared to the same period of 2015 reflects the improvement in non-performing and substandard loans.
The ratio of the allowance for loan losses to total loans was .83% as of March 31, 2016 and December 31, 2015. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was .98% as of March 31, 2016.
Non-performing loans totaled $15.0 million as of March 31, 2016 and $16.7 million as of December 31, 2015. Compared to December 31, 2015, non-performing commercial, real estate and consumer loans decreased by $1.2 million, $264,000 and $201,000, respectively. As a percentage of total loans, non-performing loans were .87% at March 31, 2016, down from .95% at December 31, 2015 and 1.52% as of March 31, 2015.
Expense Management
Total non-interest expense was $3.7 million higher in the first quarter of 2016 compared to the same period of 2015. The increase was primarily due to an increase in salaries and employee benefits of $1.6 million, net occupancy expense of $385,000, data processing fees of $182,000, professional fees of $304,000, other losses of $312,000 and other expense of $456,000, reflecting overall company growth and the Peoples Bancorp acquisition. Outside services and consultants expense increased $473,000 during the quarter primarily due to one-time expenses related to the Kosciusko and LaPorte Bancorp acquisitions of $639,000 in the first quarter of 2016.
Use of Non-GAAP Financial Measures
Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non-GAAP financial measures of the net interest margin and the allowance for loan and lease losses excluding the impact of acquisition-related purchase accounting adjustments and net income and diluted earnings per share excluding the impact of one-time costs related to acquisitions, acquisition-related purchase accounting adjustments and other events that are considered to be non-recurring. Horizon believes that these non-GAAP financial measures are helpful to investors and provide a greater
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Pg. 7 cont. Horizon Bancorp Announces an Increase in 2016 First Quarter Earnings
understanding of our business without giving effect to the purchase accounting impacts and one-time costs of acquisitions and non-core items, although these measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure.
About Horizon
Horizon Bancorp is a locally owned, independent, commercial bank holding company serving Northern and Central Indiana and Southwest and Central Michigan through its commercial banking subsidiary Horizon Bank, NA. Horizon also offers mortgage-banking services throughout the Midwest. Horizon Bancorp may be reached online at www.horizonbank.com. Its common stock is
traded on the NASDAQ Global Select Market under the symbol HBNC.
Forward Looking Statements
This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon. For these statements, Horizon claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in its Form 10-K. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.
| 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 | |
| | | 2016 | | | 2015 | | | 2015 | | | 2015 | | | 2015 | |
| Balance sheet: | | | | | | | | | | | | | |
| Total assets | | $ | 2,627,918 | | | $ | 2,652,401 | | | $ | 2,607,914 | | | $ | 2,219,307 | | | $ | 2,153,965 | |
| Investment securities | | | 642,767 | | | | 632,611 | | | | 617,860 | | | | 493,631 | | | | 495,315 | |
| Commercial loans | | | 797,754 | | | | 804,995 | | | | 795,271 | | | | 709,946 | | | | 695,736 | |
| Mortgage warehouse loans | | | 119,876 | | | | 144,692 | | | | 138,974 | | | | 195,924 | | | | 178,899 | |
| Residential mortgage loans | | | 442,806 | | | | 437,144 | | | | 430,946 | | | | 277,407 | | | | 260,390 | |
| Consumer loans | | | 359,636 | | | | 362,300 | | | | 361,298 | | | | 336,006 | | | | 326,334 | |
| Earning assets | | | 2,379,830 | | | | 2,403,482 | | | | 2,363,755 | | | | 2,031,671 | | | | 1,974,251 | |
| Non-interest bearing deposit accounts | | | 343,025 | | | | 335,955 | | | | 338,436 | | | | 307,215 | | | | 285,181 | |
| Interest bearing transaction accounts | | | 1,118,617 | | | | 1,177,651 | | | | 1,164,787 | | | | 983,912 | | | | 905,216 | |
| Time deposits | | | 416,837 | | | | 366,547 | | | | 409,852 | | | | 293,596 | | | | 274,699 | |
| Borrowings | | | 430,507 | | | | 449,347 | | | | 373,901 | | | | 385,236 | | | | 440,415 | |
| Subordinated debentures | | | 32,836 | | | | 32,797 | | | | 32,758 | | | | 32,719 | | | | 32,680 | |
| Common stockholders' equity | | | 261,417 | | | | 254,332 | | | | 252,238 | | | | 189,631 | | | | 186,991 | |
| Total stockholders’ equity | | | 261,417 | | | | 266,832 | | | | 264,738 | | | | 202,131 | | | | 199,491 | |
| | | | | | | | | | | | | | | | | | | | | |
| Income statement: | | Three months ended | |
| Net interest income | | $ | 19,774 | | | $ | 20,222 | | | $ | 19,776 | | | $ | 17,850 | | | $ | 16,886 | |
| Provision for loan losses | | | 532 | | | | 342 | | | | 300 | | | | 1,906 | | | | 614 | |
| Non-interest income | | | 7,864 | | | | 7,750 | | | | 8,400 | | | | 7,186 | | | | 7,066 | |
| Non-interest expenses | | | 19,747 | | | | 19,240 | | | | 22,235 | | | | 16,650 | | | | 16,068 | |
| Income tax expense | | | 1,978 | | | | 2,215 | | | | 1,353 | | | | 1,752 | | | | 1,912 | |
| Net income | | | 5,381 | | | | 6,175 | | | | 4,288 | | | | 4,728 | | | | 5,358 | |
| Preferred stock dividend | | | (42 | ) | | | (31 | ) | | | (31 | ) | | | (31 | ) | | | (31 | ) |
| Net income available to common shareholders | | $ | 5,339 | | | $ | 6,144 | | | $ | 4,257 | | | $ | 4,697 | | | $ | 5,327 | |
| | | | | | | | | | | | | | | | | | | | | |
| Per share data: | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.45 | | | $ | 0.51 | | | $ | 0.37 | | | $ | 0.51 | | | $ | 0.58 | |
| Diluted earnings per share | | | 0.44 | | | | 0.51 | | | | 0.36 | | | | 0.49 | | | | 0.55 | |
| Cash dividends declared per common share | | | 0.15 | | | | 0.15 | | | | 0.15 | | | | 0.14 | | | | 0.14 | |
| Book value per common share | | | 21.82 | | | | 21.30 | | | | 21.14 | | | | 20.49 | | | | 20.25 | |
| Tangible book value per common share | | | 17.08 | | | | 16.53 | | | | 16.34 | | | | 17.06 | | | | 16.80 | |
| Market value - high | | | 27.88 | | | | 28.15 | | | | 26.15 | | | | 26.03 | | | | 25.86 | |
| Market value - low | | $ | 23.11 | | | $ | 23.58 | | | $ | 22.60 | | | $ | 22.85 | | | $ | 22.38 | |
| Weighted average shares outstanding - Basic | | | 11,949,416 | | | | 11,937,247 | | | | 11,605,976 | | | | 9,240,005 | | | | 9,216,011 | |
| Weighted average shares outstanding - Diluted | | | 12,008,484 | | | | 12,013,743 | | | | 11,893,254 | | | | 9,637,586 | | | | 9,609,506 | |
| | | | | | | | | | | | | | | | | | | | | |
| Key ratios: | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.83 | % | | | 0.94 | % | | | 0.67 | % | | | 0.87 | % | | | 1.05 | % |
| Return on average common stockholders' equity | | | 8.26 | | | | 9.53 | | | | 6.76 | | | | 9.88 | | | | 11.66 | |
| Net interest margin | | | 3.45 | | | | 3.50 | | | | 3.51 | | | | 3.67 | | | | 3.70 | |
| Loan loss reserve to total loans | | | 0.83 | | | | 0.83 | | | | 0.93 | | | | 1.08 | | | | 1.13 | |
| Non-performing loans to loans | | | 0.87 | | | | 0.95 | | | | 1.21 | | | | 1.51 | | | | 1.52 | |
| Average equity to average assets | | | 10.16 | | | | 10.32 | | | | 10.38 | | | | 9.32 | | | | 9.56 | |
| Bank only capital ratios: | | | | | | | | | | | | | |
| Tier 1 capital to average assets | | | 9.03 | | | | 8.77 | | | | 9.31 | | | | 8.24 | | | | 8.77 | |
| Tier 1 capital to risk weighted assets | | | 12.53 | | | | 11.80 | | | | 12.30 | | | | 10.76 | | | | 11.30 | |
| Total capital to risk weighted assets | | | 13.31 | | | | 12.57 | | | | 13.17 | | | | 11.76 | | | | 12.35 | |
| | | | | | | | | | | | | | | | | | | | | |
| Loan data: | | | | | | | | | | | | | | | | | | | | |
| Substandard loans | | $ | 23,600 | | | $ | 25,127 | | | $ | 26,073 | | | $ | 28,220 | | | $ | 27,355 | |
| 30 to 89 days delinquent | | | 2,149 | | | | 5,011 | | | | 4,868 | | | | 3,326 | | | | 3,945 | |
| | | | | | | | | | | | | | | | | | | | | |
| 90 days and greater delinquent - accruing interest | | $ | 1 | | | $ | 28 | | | $ | 100 | | | $ | 207 | | | $ | 19 | |
| Trouble debt restructures - accruing interest | | | 1,231 | | | | 1,218 | | | | 2,948 | | | | 3,271 | | | | 4,368 | |
| Trouble debt restructures - non-accrual | | | 2,857 | | | | 3,172 | | | | 3,994 | | | | 4,523 | | | | 4,711 | |
| Non-accrual loans | | | 10,895 | | | | 12,262 | | | | 13,956 | | | | 15,050 | | | | 13,282 | |
| Total non-performing loans | | $ | 14,984 | | | $ | 16,680 | | | $ | 20,998 | | | $ | 23,051 | | | $ | 22,380 | |
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 | |
| | | 2016 | | | 2015 | | | 2015 | | | 2015 | | | 2015 | |
| Commercial | | $ | 6,460 | | | $ | 7,195 | | | $ | 8,842 | | | $ | 8,386 | | | $ | 7,876 | |
| Real estate | | | 1,794 | | | | 2,476 | | | | 2,297 | | | | 3,044 | | | | 3,281 | |
| Mortgage warehousing | | | 1,014 | | | | 1,007 | | | | 1,015 | | | | 1,319 | | | | 1,272 | |
| Consumer | | | 4,968 | | | | 3,856 | | | | 4,014 | | | | 3,672 | | | | 4,205 | |
| Total | | $ | 14,236 | | | $ | 14,534 | | | $ | 16,168 | | | $ | 16,421 | | | $ | 16,634 | |
Net Charge-offs (Recoveries)
(Dollars in Thousands, Unaudited)
| | | Three months ended | |
| | | March 31 | | | December 31 | | | September 30 | | | June 30 | | | March 31 | |
| | | 2016 | | | 2015 | | | 2015 | | | 2015 | | | 2015 | |
| Commercial | | $ | 405 | | | $ | 1,595 | | | $ | 77 | | | $ | 1,583 | | | $ | (11 | ) |
| Real estate | | | 84 | | | | (59 | ) | | | 96 | | | | 161 | | | | 20 | |
| Mortgage warehousing | | | - | | | | - | | | | - | | | | - | | | | - | |
| Consumer | | | 342 | | | | 440 | | | | 380 | | | | 375 | | | | 472 | |
| Total | | $ | 831 | | | $ | 1,976 | | | $ | 553 | | | $ | 2,119 | | | $ | 481 | |
Total Non-performing Loans
(Dollars in Thousands, Unaudited)
| | | March 31 | | | December 31 | | | September 30 | | | June 30 | | | March 31 | |
| | | 2016 | | | 2015 | | | 2015 | | | 2015 | | | 2015 | |
| Commercial | | $ | 5,774 | | | $ | 7,005 | | | $ | 10,832 | | | $ | 13,384 | | | $ | 11,540 | |
| Real estate | | | 5,973 | | | | 6,237 | | | | 6,315 | | | | 5,819 | | | | 6,062 | |
| Mortgage warehousing | | | - | | | | - | | | | - | | | | - | | | | - | |
| Consumer | | | 3,237 | | | | 3,438 | | | | 3,851 | | | | 3,848 | | | | 4,778 | |
| Total | | $ | 14,984 | | | $ | 16,680 | | | $ | 20,998 | | | $ | 23,051 | | | $ | 22,380 | |
Other Real Estate Owned and Repossessed Assets
(Dollars in Thousands, Unaudited)
| | | March 31 | | | December 31 | | | September 30 | | | June 30 | | | March 31 | |
| | | 2016 | | | 2015 | | | 2015 | | | 2015 | | | 2015 | |
| Commercial | | $ | 424 | | | $ | 161 | | | $ | 324 | | | $ | 376 | | | $ | 307 | |
| Real estate | | | 3,393 | | | | 3,046 | | | | 958 | | | | 58 | | | | 219 | |
| Mortgage warehousing | | | - | | | | - | | | | - | | | | - | | | | - | |
| Consumer | | | - | | | | - | | | | - | | | | 37 | | | | 223 | |
| Total | | $ | 3,817 | | | $ | 3,207 | | | $ | 1,282 | | | $ | 471 | | | $ | 749 | |
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
| | | Three Months Ended | | | Three Months Ended | |
| | | March 31, 2016 | | | March 31, 2015 | |
| | | Average | | | | | | Average | | | Average | | | | | | Average | |
| | | Balance | | | Interest | | | Rate | | | Balance | | | Interest | | | Rate | |
| | | | | | | | | | | | | | | | | | | |
| ASSETS | | | | | | | | | | | | | | | | | | |
| Interest-earning assets | | | | | | | | | | | | | | | | | | |
| Federal funds sold | | $ | 2,424 | | | $ | 1 | | | | 0.17 | % | | $ | 4,804 | | | $ | 2 | | | | 0.17 | % |
| Interest-earning deposits | | | 20,810 | | | | 49 | | | | 0.95 | % | | | 10,772 | | | | 3 | | | | 0.11 | % |
| Investment securities - taxable | | | 463,544 | | | | 2,494 | | | | 2.16 | % | | | 360,554 | | | | 2,149 | | | | 2.42 | % |
| Investment securities - non-taxable (1) | | | 182,275 | | | | 1,237 | | | | 3.79 | % | | | 140,748 | | | | 1,077 | | | | 4.31 | % |
| Loans receivable (2)(3) | | | 1,698,197 | | | | 19,747 | | | | 4.69 | % | | | 1,382,992 | | | | 16,862 | | | | 4.96 | % |
| Total interest-earning assets (1) | | | 2,367,250 | | | | 23,528 | | | | 4.09 | % | | | 1,899,870 | | | | 20,093 | | | | 4.39 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-interest-earning assets | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | | 32,925 | | | | | | | | | | | | 28,994 | | | | | | | | | |
| Allowance for loan losses | | | (14,508 | ) | | | | | | | | | | | (16,489 | ) | | | | | | | | |
| Other assets | | | 214,604 | | | | | | | | | | | | 157,553 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 2,600,271 | | | | | | | | | | | $ | 2,069,928 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing deposits | | $ | 1,534,833 | | | $ | 1,491 | | | | 0.39 | % | | $ | 1,215,862 | | | $ | 1,232 | | | | 0.41 | % |
| Borrowings | | | 406,679 | | | | 1,759 | | | | 1.74 | % | | | 337,430 | | | | 1,479 | | | | 1.78 | % |
| Subordinated debentures | | | 32,813 | | | | 504 | | | | 6.18 | % | | | 32,657 | | | | 496 | | | | 6.16 | % |
| Total interest-bearing liabilities | | | 1,974,325 | | | | 3,754 | | | | 0.76 | % | | | 1,585,949 | | | | 3,207 | | | | 0.82 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
| Demand deposits | | | 339,141 | | | | | | | | | | | | 271,158 | | | | | | | | | |
| Accrued interest payable and other liabilities | | | 22,521 | | | | | | | | | | | | 14,989 | | | | | | | | | |
| Stockholders' equity | | | 264,284 | | | | | | | | | | | | 197,832 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 2,600,271 | | | | | | | | | | | $ | 2,069,928 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income/spread | | | | | | $ | 19,774 | | | | 3.32 | % | | | | | | $ | 16,886 | | | | 3.57 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest income as a percent of average interest earning assets (1) | | | | | | | | | | | 3.45 | % | | | | | | | | | | | 3.70 | % |
| (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)
| | | March 31 | | | December 31 | |
| | | 2016 | | | 2015 | |
| | | (Unaudited) | | | | |
| Assets | | | | | | |
| Cash and due from banks | | $ | 47,612 | | | $ | 48,650 | |
| Investment securities, available for sale | | | 462,476 | | | | 444,982 | |
| Investment securities, held to maturity (fair value of $188,093 and $193,703) | | | 180,291 | | | | 187,629 | |
| Loans held for sale | | | 3,168 | | | | 7,917 | |
| Loans, net of allowance for loan losses of $14,236 and $14,534 | | | 1,705,836 | | | | 1,734,597 | |
| Premises and equipment, net | | | 60,190 | | | | 60,798 | |
| Federal Reserve and Federal Home Loan Bank stock | | | 13,823 | | | | 13,823 | |
| Goodwill | | | 49,600 | | | | 49,600 | |
| Other intangible assets | | | 7,095 | | | | 7,371 | |
| Interest receivable | | | 10,476 | | | | 10,535 | |
| Cash value of life insurance | | | 54,849 | | | | 54,504 | |
| Other assets | | | 32,502 | | | | 31,995 | |
| Total assets | | $ | 2,627,918 | | | $ | 2,652,401 | |
| Liabilities | | | | | | | | |
| Deposits | | | | | | | | |
| Non-interest bearing | | $ | 343,025 | | | $ | 335,955 | |
| Interest bearing | | | 1,535,454 | | | | 1,544,198 | |
| Total deposits | | | 1,878,479 | | | | 1,880,153 | |
| Borrowings | | | 430,507 | | | | 449,347 | |
| Subordinated debentures | | | 32,836 | | | | 32,797 | |
| Interest payable | | | 580 | | | | 507 | |
| Other liabilities | | | 24,099 | | | | 22,765 | |
| Total liabilities | | | 2,366,501 | | | | 2,385,569 | |
| Commitments and contingent liabilities | | | | | | | | |
| Stockholders’ Equity | | | | | | | | |
| Preferred stock, Authorized, 1,000,000 shares | | | | | | | | |
| Series B shares $.01 par value, $1,000 liquidation value | | | | | | | | |
| Issued 0 and 12,500 shares | | | - | | | | 12,500 | |
| Common stock, no par value | | | | | | | | |
| Authorized, 22,500,000 shares | | | | | | | | |
| Issued, 12,008,497 and 11,995,324 shares | | | | | | | | |
| Outstanding, 11,983,313 and 11,939,887 shares | | | - | | | | - | |
| Additional paid-in capital | | | 106,500 | | | | 106,370 | |
| Retained earnings | | | 152,219 | | | | 148,685 | |
| Accumulated other comprehensive income (loss) | | | 2,698 | | | | (723 | ) |
| Total stockholders’ equity | | | 261,417 | | | | 266,832 | |
| Total liabilities and stockholders’ equity | | $ | 2,627,918 | | | $ | 2,652,401 | |
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Per Share Data)
| | | Three Months Ended March 31 | |
| | | 2016 | | | 2015 | |
| | | (Unaudited) | | | (Unaudited) | |
| Interest Income | | | | | | |
| Loans receivable | | $ | 19,747 | | | $ | 16,862 | |
| Investment securities | | | | | | | | |
| Taxable | | | 2,544 | | | | 2,154 | |
| Tax exempt | | | 1,237 | | | | 1,077 | |
| Total interest income | | | 23,528 | | | | 20,093 | |
| Interest Expense | | | | | | | | |
| Deposits | | | 1,491 | | | | 1,232 | |
| Borrowed funds | | | 1,759 | | | | 1,479 | |
| Subordinated debentures | | | 504 | | | | 496 | |
| Total interest expense | | | 3,754 | | | | 3,207 | |
| Net Interest Income | | | 19,774 | | | | 16,886 | |
| Provision for loan losses | | | 532 | | | | 614 | |
| Net Interest Income after Provision for Loan Losses | | | 19,242 | | | | 16,272 | |
| Non-interest Income | | | | | | | | |
| Service charges on deposit accounts | | | 1,238 | | | | 999 | |
| Wire transfer fees | | | 121 | | | | 151 | |
| Interchange fees | | | 1,458 | | | | 1,102 | |
| Fiduciary activities | | | 1,635 | | | | 1,297 | |
| Gain on sale of investment securities (includes $108 and $124 for the three months ended March 31, 2016 and 2015, respectively, related to accumulated other comprehensive earnings reclassifications) | | | 108 | | | | 124 | |
| Gain on sale of mortgage loans | | | 2,114 | | | | 2,379 | |
| Mortgage servicing income net of impairment | | | 447 | | | | 179 | |
| Increase in cash value of bank owned life insurance | | | 345 | | | | 258 | |
| Death benefit on bank owned life insurance | | | - | | | | 145 | |
| Other income | | | 398 | | | | 432 | |
| Total non-interest income | | | 7,864 | | | | 7,066 | |
| Non-interest Expense | | | | | | | | |
| Salaries and employee benefits | | | 10,065 | | | | 8,504 | |
| Net occupancy expenses | | | 1,936 | | | | 1,551 | |
| Data processing | | | 1,105 | | | | 923 | |
| Professional fees | | | 831 | | | | 527 | |
| Outside services and consultants | | | 1,099 | | | | 626 | |
| Loan expense | | | 1,195 | | | | 1,257 | |
| FDIC insurance expense | | | 405 | | | | 337 | |
| Other losses | | | 267 | | | | (45 | ) |
| Other expense | | | 2,844 | | | | 2,388 | |
| Total non-interest expense | | | 19,747 | | | | 16,068 | |
| Income Before Income Tax | | | 7,359 | | | | 7,270 | |
| Income tax expense (includes $38 and $43 for the three months ended March 31, 2016 and 2015, respectively, related to income tax expense from reclassification items) | | | 1,978 | | | | 1,912 | |
| Net Income | | | 5,381 | | | | 5,358 | |
| Preferred stock dividend | | | (42 | ) | | | (31 | ) |
| Net Income Available to Common Shareholders | | $ | 5,339 | | | $ | 5,327 | |
| Basic Earnings Per Share | | $ | 0.45 | | | $ | 0.58 | |
| Diluted Earnings Per Share | | | 0.44 | | | | 0.55 | |
