Horizon Bancorp Announces Record Quarterly Earnings

Horizon Bancorp Announces Record Quarterly Earnings

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

SUMMARY:

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

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

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

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

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

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

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

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

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

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

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

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

Income Statement Highlights

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

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

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

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

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

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

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

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

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

Lending Activity

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

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

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

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

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

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

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

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

Expense Management

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

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

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

Income tax expense totaled $2.5 million for the first quarter of 2018, a decrease of $3.2 million and $531,000 when compared to the fourth quarter and first quarter of 2017, respectively. The decrease was primarily due to the impact of the new corporate tax rate which was signed into law at the end of 2017. An adjustment to Horizon’s net deferred tax asset of $2.4 million ($1.7 million of net deferred tax assets and $766,000 of net deferred tax assets related to accumulated other comprehensive income) was recorded to income tax expense during the fourth quarter of 2017 to reflect the new corporate tax rate.

Use of Non-GAAP Financial Measures

Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP.  Specifically, we have included non-GAAP financial measures relating to net income, diluted earnings per share, net interest margin, total loans and loan growth, the allowance for loan and lease losses, tangible stockholders’ equity, tangible book value per share, the return on average assets and the return on average equity. In each case, we have identified special circumstances that we consider to be non-recurring and have excluded them, to show the impact of such events as acquisition-related purchase accounting adjustments, prepayment penalties on borrowings and the tax reform bill, among others we have identified in our reconciliations. Horizon believes that these non-GAAP financial measures are helpful to investors and provide a greater understanding of our business without giving effect to the purchase accounting impacts and one-time costs of acquisitions and non-core items. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure.  See the tables and other information below and contained elsewhere in this press release for reconciliations of the non-GAAP figures identified herein and their most comparable GAAP measures.

          
Non-GAAP Reconciliation of Tangible Stockholders' Equity and Tangible Book Value per Share
(Dollars in Thousands Except per Share Data, Unaudited)
         
 March 31 December 31 September 30 June 30 March 31
  2018  2017  2017  2017  2017
Total stockholders' equity$  460,416 $  457,078 $  392,055 $  357,259 $  348,575
Less: Intangible assets   131,724    132,282    103,244    86,726    87,094
Total tangible stockholders' equity$  328,692 $  324,796 $  288,811 $  270,533 $  261,481
          
Common shares outstanding   25,555,235    25,529,819    23,325,459    22,176,465    22,176,465
          
Tangible book value per common share$  12.86 $  12.72 $  12.38 $  12.20 $  11.79

 

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

About Horizon

Horizon Bancorp is an independent, commercial bank holding company serving northern and central Indiana, and southern, central and the Great Lakes Bay regions of Michigan through its commercial banking subsidiary Horizon Bank. Horizon also offers mortgage-banking services throughout the Midwest. Horizon Bancorp may be reached online at www.horizonbank.com.  Its common stock is traded on the NASDAQ Global Select Market under the symbol HBNC.

Forward Looking Statements

This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon.  For these statements, Horizon claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission.  Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance.  The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties.  We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. 

Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.  Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in its Form 10-K.  Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

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

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


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

 




 
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
 
 Three Months Ended Three Months Ended
 March 31, 2018 March 31, 2017
 Average
Balance
 Interest Average
Rate
 Average
Balance
 Interest Average
Rate
 Assets 
 Interest-earning assets 
 Federal funds sold$  3,714  $  14 1.53% $  3,034  $  5 0.67%
 Interest-earning deposits   22,962     90 1.59%    24,748     69 1.13%
 Investment securities - taxable   421,068     2,326 2.24%    398,871     2,332 2.37%
 Investment securities - non-taxable(1)   307,921     1,865 2.88%    270,522     1,637 3.41%
 Loans receivable(2)(3)   2,824,478     35,131 5.04%    2,100,254     24,791 4.79%
 Total interest-earning assets(1)   3,580,143     39,426 4.50%    2,797,429     28,834 4.28%
 
 Non-interest-earning assets 
 Cash and due from banks   43,809     40,994  
 Allowance for loan losses   (16,342)    (14,937) 
 Other assets   335,227     279,982  
 
 Total average assets$  3,942,837  $  3,103,468  
 
 Liabilities and Stockholders' Equity 
 Interest-bearing liabilities 
 Interest-bearing deposits$  2,304,829  $  2,871 0.51% $  1,960,337  $  1,753 0.36%
 Borrowings   528,066     2,572 1.98%    249,923     937 1.52%
 Subordinated debentures   36,477     572 6.36%    36,290     576 6.44%
 Total interest-bearing liabilities   2,869,372     6,015 0.85%    2,246,550     3,266 0.59%
 
 Non-interest-bearing liabilities 
 Demand deposits   595,644     491,154  
 Accrued interest payable and other liabilities   17,745     20,672  
 Stockholders' equity   460,076     345,092  
 
 Total average liabilities and stockholders' equity$  3,942,837  $  3,103,468  
 
 Net interest income/spread $  33,411 3.65% $  25,568 3.69%
 Net interest income as a percentage of average
  interest-earning assets(1)
 3.81% 3.80%
 
(1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
(3) Non-accruing loans for the purpose of the computations above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis.



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

 

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