News Details

MICHIGAN CITY, Ind.--(BUSINESS WIRE)-- (NASDAQ: HBNC) – Horizon Bancorp today announced its unaudited financial results for the three month period ended March 31, 2017. All share data has been adjusted to reflect Horizon’s three-for-two stock split effective November 14, 2016.

SUMMARY:

• Net income for the first quarter of 2017 was $8.2 million or $0.37 diluted earnings per share compared to $5.4 million or $0.30 diluted earnings per share for the same period in 2016. The first quarter of 2017 represents an excellent start to the year given that the first quarter is typically a seasonal low revenue point for Horizon.
• Net income, excluding acquisition-related expenses, gain on sale of investment securities and purchase accounting adjustments (“core net income”), for the first quarter of 2017 increased 38.9% to $7.5 million or $0.34 diluted earnings per share compared to $5.4 million or $0.30 diluted earnings per share for the same period of 2016.
• Return on average assets was 1.07% for the first quarter of 2017 compared to 0.83% for the same period in 2016.
• Net interest income for the first quarter of 2017 increased $5.8 million, or 29.3%, compared to the same period in 2016.
• Net interest margin was 3.80% for the first quarter of 2017 compared to 2.92% for the prior quarter and 3.45% for the same period in 2016. The improvement in net interest margin reflects Horizon’s execution on its plan to reduce expensive funding costs, which was accomplished in the fourth quarter of 2016.
• Net interest margin, excluding the impact of prepayment penalties on borrowings and purchase accounting adjustments (“core net interest margin”), was 3.66% for the first quarter of 2017 compared to 3.45% for the prior quarter and 3.36% for the same period in 2016.
• Horizon’s tangible book value per share rose to $11.79 at March 31, 2017, compared to $11.48 at December 31, 2016.

• Commercial loans, excluding acquired commercial loans, increased by an annualized rate of 12.8%, or $33.8 million, during the first quarter of 2017.
• Consumer loans, excluding acquired consumer loans, increased by an annualized rate of 18.8%, or $18.5 million, during the first quarter of 2017.
• On February 3, 2017, Horizon completed the purchase and assumption of certain assets and liabilities of a single branch of First Farmers Bank & Trust Company located in Bargersville, Indiana. The acquired office was closed and consolidated into Horizon’s existing Bargersville location.
• Our Grand Rapids team moved to their new downtown loan production office during February 2017. This office was approved to continue as a full service branch which will take place in the second quarter of 2017.
• Early in the second quarter, Horizon hired two additional seasoned commercial lenders for our Fort Wayne, Indiana loan production office.
• At the beginning of the second quarter of 2017, Michael Lamping, joined Horizon as Central Ohio Market President. A loan production office will be opened in the greater Columbus, Ohio area during the second quarter of 2017 and will focus on commercial business.
• Horizon received regulatory approval to open a new office in Noblesville, Indiana, which will be open later this year.
• Horizon, for the first time, hired a corporate general legal counsel in the first quarter. The objective for this position is, in part, to better manage legal costs and to more closely monitor changes in the regulatory and legal landscape.

Craig Dwight, Chairman and CEO, commented: “During the first quarter of 2017, Horizon’s business model of diversified and balanced revenue streams was proven to be effective as an increase in commercial and consumer lending helped to offset the seasonal low in residential mortgage revenues. Excluding non-core items, Horizon realized an increase in net income of $2.1 million, or 38.9%, in the first quarter of 2017 when compared to the same period of 2016 resulting in an increase in core diluted earnings per share of 13.3%. Core net interest margin increased in the first quarter of 2017 to 3.66% from 3.36% for the same period in 2016. Horizon also realized solid growth in service charges on deposit accounts of 8.7%, interchange fees of 26.3% and fiduciary activities of 17.6% in the first quarter of 2017 when compared to the same period in 2016.”

Mr. Dwight continued, “Although commercial and consumer loan growth was strong in the first quarter of 2017, total loan growth was tempered by a decrease in our mortgage warehouse portfolio. Excluding acquired loans, commercial loan growth increased by an annual rate of 12.8% and was fueled by our growth markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo, which combined produced total loan growth of $39.7 million for the quarter. Additionally, consumer loans, excluding acquired consumer loans, increased by 18.8% on an annualized basis during the quarter as a result of a new seasoned consumer loan portfolio manager in the third quarter of 2016 and increasing our focus on the management of direct consumer loans. The increases in commercial and consumer loans were offset by a decrease in mortgage warehouse loans of $46.4 million from December 31, 2016 to March 31, 2017. The decrease in mortgage warehouse loans was primarily due to quicker turn-around times by the end investors to fund loans which resulted in a lower average balance in the portfolio during the first quarter of 2017. With our established presence in the growth markets of Kalamazoo and Indianapolis, coupled with our recent investments in Fort Wayne, Grand Rapids and Columbus, Horizon is well positioned to continue our growth momentum. In addition, Horizon’s solid growth in trust and service fee income has contributed to our plan to decrease dependence on margin income. ”

Dwight concluded, “We are pleased to have completed the purchase of certain assets totaling $3.5 million and the assumption of certain deposits totaling $14.8 million from First Farmers Bank & Trust Company’s Bargersville, Indiana branch which closed on February 3, 2017, enhancing our presence in this attractive and growing central Indiana market.”

Income Statement Highlights

Net income for the first quarter of 2017 was $8.2 million or $0.37 diluted earnings per share compared to $5.6 million or $0.25 diluted earnings per share for the fourth quarter of 2016. The increase in net income and diluted earnings per share from the previous quarter reflects increases in net interest income of $4.6 million and a decrease in non-interest expense and provision for loan losses of $1.1 million and $293,000, respectively, which was partially offset by a decrease in non-interest income of $1.9 million and an increase in income tax expense of $1.4 million. Interest expense decreased $5.2 million primarily due to prepayment penalties on borrowings of $4.8 million during the fourth quarter of 2016. Interest income decreased $555,000 due to a decrease in loan interest income of $924,000, offset by an increase in interest on investment securities of $369,000 during the first quarter of 2017. The decrease in loan interest income was primarily due to the decrease in mortgage warehouse loan balances in the first quarter. The decrease in non-interest income was primarily due to a decrease in the gain on sale of investments of $926,000 and a decrease in gain on mortgage loan sales of $590,000.

Net income for the first quarter of 2017 was $8.2 million or $0.37 diluted earnings per share compared to $5.4 million or $0.30 diluted earnings per share for the first quarter of 2016. The increase in net income and diluted earnings per share from the same period of 2016 reflects increases in net interest income and non-interest income of $5.8 million and $172,000, respectively, and a decrease in provision for loan losses of $202,000, partially offset by an increase in non-interest expense and income tax expense of $2.3 million and $1.1 million, respectively.

The increase in diluted earnings per share was partially offset by an increase in dilutive shares outstanding as a result of the stock issued in the Kosciusko Financial, Inc. and LaPorte Bancorp, Inc. acquisitions in 2016. Excluding acquisition-related expenses, gain on sale of investment securities and acquisition-related purchase accounting adjustments, net income for the first quarter of 2017 was $7.5 million or $0.34 diluted earnings per share compared to $5.4 million or $0.30 diluted earnings per share in the first quarter of 2016.

Horizon’s net interest margin was 3.80% during the first quarter of 2017, up from 2.92% for the prior quarter and 3.45% for same period of 2016. The increase in the net interest margin compared to the prior quarter was primarily due to prepayment penalties incurred on high fixed-rate borrowings as part of Horizon’s balance sheet restructuring transaction in the fourth quarter of 2016 in addition to a decrease in average outstanding borrowings. Average outstanding borrowings during the first quarter of 2017 were $132.3 million and $156.8 million lower when compared to the prior quarter and the same prior-year period.

The increase in the net interest margin compared to the same period of 2016 was primarily due to an increase in the yield earned on loans and a decrease in the cost of borrowings. Excluding prepayment penalties on borrowings and acquisition-related purchase accounting adjustments, the margin would have been 3.66% for the first quarter of 2017 compared to 3.45% for the prior quarter and 3.36% for the same period of 2016. Interest expense from the prepayment penalties on borrowings was $4.8 million for the fourth quarter of 2016. Interest income from acquisition-related purchase accounting adjustments was $1.0 million, $900,000 and $547,000 for the three months ended March 31, 2017, December 31, 2016, and March 31, 2016, respectively.

Lending Activity

Total loans increased $4.7 million from $2.144 billion as of December 31, 2016 to $2.149 billion as of March 31, 2017 as commercial loans increased by $36.5 million, residential mortgage loans increased by $1.8 million and consumer loans increased by $19.0 million. Offsetting these increases was a decrease in mortgage warehouse loans of $46.4 million as of March 31, 2017. Total loans, excluding acquired loans, mortgage warehouse loans and loans held for sale, increased 2.7% for the three months ended March 31, 2017. Commercial and consumer loans, excluding acquired loans, increased $33.8 million, or an annualized growth rate of 12.8%, and $18.5 million, or an annualized growth rate of 18.8%, respectively.

Loan balances in the Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo totaled $436.8 million as of March 31, 2017. Combined, these markets contributed $39.7 million, or 10.0%, in loan growth during the three months ended March 31, 2017.

Residential mortgage lending activity during the three months ended March 31, 2017 generated $1.9 million in income from the gain on sale of mortgage loans, a decrease of $137,000 from the same period of 2016. Total origination volume for the three months ended March 31, 2017, including loans placed into portfolio, totaled $65.9 million, representing a decrease of 17.0% from the same period of 2016. The decrease in mortgage loan origination volume is primarily due to an increase in mortgage loan interest rates when comparing the first quarter of 2017 to the same period of 2016. Purchase money mortgage originations during the first quarter of 2017 represented 69.8% of total originations compared to 68.0% of originations during the previous quarter and 65.3% during the first quarter of 2016.

The provision for loan losses was $330,000 for the first quarter of 2017 compared to $532,000 for the same period of 2016. The decrease in the provision for loan losses during the first quarter of 2017 was due to lower charge-offs, stable delinquency trends and a decrease in non-performing loans.

The ratio of the allowance for loan losses to total loans increased to 0.70% as of March 31, 2017 from 0.69% as of December 31, 2016 due to an increase in allowance for loan losses. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 0.89% as of March 31, 2017 compared to 0.91% as of December 31, 2016. Loan loss reserves and credit-related loan discounts on acquired loans as a percentage of total loans was 1.31% as of March 31, 2017 compared to 1.39% as of December 31, 2016.

Non-performing loans to total loans decreased 4 basis points to 0.46% at March 31, 2017 from 0.50% at December 31, 2016. Non-performing loans totaled $9.8 million as of March 31, 2017, a decrease of $849,000 from $10.7 million as of December 31, 2016. Compared to December 31, 2016, non-performing commercial loans decreased by $902,000, non-performing real estate loans increased by $35,000 and non-performing consumer loans increased $18,000.

Expense Management

Total non-interest expense was $2.3 million higher in the first quarter of 2017 compared to the same period of 2016. The increase was primarily due to an increase in salaries and employee benefits of $1.6 million, net occupancy expenses of $516,000, data processing expenses of $202,000, and other expenses of $431,000 reflecting overall company growth, market expansion and recent acquisitions. Professional fee expense decreased $218,000 in the first quarter of 2017 when compared to the same period of 2016 primarily due to one-time expenses related to the Kosciusko Financial, Inc. and LaPorte Bancorp, Inc. acquisitions in 2016. Other losses decreased $217,000 in the first quarter of 2017 when compared to the same period of 2016 due to a decrease in debit card fraud-related expense. FDIC insurance expense decreased $142,000 in the first quarter of 2017 when compared to the same period of 2016 as the assessment rate schedule was reduced effective for assessment payments due in the fourth quarter of 2016 and 2017.

Use of Non-GAAP Financial Measures

Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non-GAAP financial measures of the net interest margin and the allowance for loan and lease losses excluding the impact of acquisition-related purchase accounting adjustments, total loans and loan growth, 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 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. See the tables and other information contained elsewhere in this press release for reconciliations of the non-GAAP figures identified herein and their most comparable GAAP measures.

About Horizon

Horizon Bancorp is an 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.

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

Source: Horizon Bancorp