MICHIGAN CITY, Ind., Jan. 24, 2018 (GLOBE NEWSWIRE) -- (NASDAQ GS:HBNC) – Horizon Bancorp (“Horizon”) today announced its unaudited financial results for the three-month and twelve-month periods ended December 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 year ended December 31, 2017 was $33.1 million, or $1.43 diluted earnings per share, compared to $23.9 million, or $1.19 diluted earnings per share, for the year ended December 31, 2016.
- Net income, excluding acquisition-related expenses, gain on sale of investment securities, prepayment penalties on borrowings, gain on the accounting for Horizon’s equity interest in Lafayette Community Bancorp (“Lafayette”), tax reform bill impact and purchase accounting adjustments (“core net income”) for the year ended December 31, 2017 increased 21.4% to $35.5 million or $1.53 diluted earnings per share compared to $29.2 million or $1.45 diluted earnings per share for the year of 2016.
- Net income for the fourth quarter of 2017 was $7.6 million, or $0.30 diluted earnings per share, compared to $8.2 million, or $0.36 diluted earnings per share, for the third quarter of 2017 and $5.6 million, or $0.25 diluted earnings per share, for the fourth quarter of 2016.
- Core net income for the fourth quarter of 2017 was $10.1 million, or $0.40 diluted earnings per share, compared to $9.2 million, or $0.41 diluted earnings per share, for the third quarter of 2017 and $8.5 million, or $0.38 diluted earnings per share, for the fourth quarter of 2016.
- Return on average assets was 0.97% for the year ended December 31, 2017 compared to 0.81% for the year ended December 31, 2016.
- Return on average assets, excluding acquisition-related expenses, gain on sale of investment securities, prepayment penalties on borrowings, gain on the accounting for Horizon’s equity interest in Lafayette, tax reform bill impact and purchase accounting adjustments (“core return on average assets”), for the year ended December 31, 2017 was 1.04% compared to 0.99% for the year ended December 31, 2016.
- Total loans increased by a rate of 32.2%, or $691.0 million, during 2017. Total loans, excluding acquired loans, increased by a rate of 11.3%, or $242.7 million, during 2017.
- Commercial loans increased by a rate of 51.2%, or $547.9 million, during 2017. Commercial loans, excluding acquired commercial loans, increased by a rate of 14.3%, or $152.7 million, during 2017.
- Consumer loans increased by a rate of 28.7%, or $114.4 million, during 2017. Consumer loans, excluding acquired consumer loans, increased by a rate of 26.3%, or $104.7 million, during 2017.
- Net interest income increased $26.1 million, or 30.4%, to $112.1 million for the year ended December 31, 2017 compared to $86.0 million for the year ended December 31, 2016.
- Net interest margin was 3.75% for the year ended December 31, 2017 compared to 3.29% for the year ended December 31, 2016. The improvement in net interest margin from the prior year was due to Horizon executing a strategy to reduce expensive funding costs in the fourth quarter of 2016, an increase in average interest-earning assets, an increase in loan yields and the increase in interest rates during 2017.
- Net interest margin, excluding the impact of prepayment penalties on borrowings and purchase accounting adjustments (“core net interest margin”), was 3.64% for the year ended December 31, 2017 compared to 3.38% for the year ended December 31, 2016.
- Horizon’s tangible book value per share increased following the acquisitions of Lafayette and Wolverine Bancorp, Inc. (“Wolverine”) to $12.72 at December 31, 2017, compared to $12.38 and $11.48 at September 30, 2017 and December 31, 2016, respectively.
- On October 17, 2017, Horizon closed on the merger with Wolverine and its wholly-owned subsidiary, Wolverine Bank, headquartered in Midland, Michigan. The related system integration was successfully completed on November 10, 2017.
Craig Dwight, Chairman and CEO, commented: “I am very pleased to announce Horizon Bancorp’s 2017 results and the incredible effort put forth by our entire team. Horizon’s performance for the year required an incredible team effort, based on the fact that we reported solid organic loan growth and successfully closed on a single branch acquisition and two whole-banks mergers. In addition, we were able to improve our net interest margin as a result of changes we made to our balance sheet in the fourth quarter of 2016 and therefore realized the benefits of said changes in 2017. Horizon’s core net income of $10.1 million for the fourth quarter and $35.5 million for the year is an increase of 19.0% and 21.4%, respectively, when compared to the prior year. Core diluted earnings per share increased 5.3%, to $0.40, for the fourth quarter and 5.5%, to $1.53, for 2017 when compared to the prior year.”
Dwight continued, “We continued to follow our balanced strategy of well-executed acquisitions and organic growth throughout 2017. During the first quarter of 2017, Horizon completed the acquisition of a single branch of First Farmers Bank & Trust Company located in Bargersville, Indiana which added $3.4 million in loans and $14.8 million in deposits and enhanced our presence in this attractive and rapidly growing central Indiana market. During the third quarter of 2017, we completed the acquisition of Lafayette Community Bancorp adding an experienced team of bankers to capitalize on future opportunities in the growth market of Lafayette, Indiana. Horizon also completed the acquisition of Wolverine Bancorp, Inc. during the fourth quarter of 2017 adding another experienced team of bankers located at three full-service locations in the Great Lakes Bay Region of Michigan and a loan production office in Troy, Michigan. The acquisitions of Lafayette and Wolverine increased total loans by $445.0 million.”
Mr. Dwight concluded, “In addition to these acquisitions, we continued to execute our organic growth strategy and experienced solid loan growth in 2017. Total loans, excluding acquired loans, loans held for sale and mortgage warehouse loans increased by 14.4%, or $288.9 million, primarily due to commercial and consumer loan growth. Horizon’s growth markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo, grew by $109.1 million, or 27.5%, during the year. The addition of a seasoned consumer loan portfolio manager during the third quarter of 2016 and an increased focus on the management of direct consumer loans resulted in an increase of 26.3% in consumer loans during 2017.”
Income Statement Highlights
Net income for the fourth quarter of 2017 was $7.6 million, or $0.30 diluted earnings per share, compared to $8.2 million, or $0.36 diluted earnings per share, for the third quarter of 2017 and $5.6 million, or $0.25 diluted earnings per share, for the fourth quarter of 2016. Excluding acquisition-related expenses, gain on sale of investment securities, prepayment penalties on borrowings, gain on the accounting for Horizon’s equity interest in Lafayette, tax reform bill impact and purchase accounting adjustments (“core net income”), net income for the fourth quarter of 2017 was $10.1 million, or $0.40 diluted earnings per share, compared to $9.2 million, or $0.41 diluted earnings per share, for the third quarter of 2017 and $8.5 million, or $0.38 diluted earnings per share, for the fourth quarter of 2016.
The decrease in net income from the third quarter of 2017 to the fourth quarter of 2017 reflects increases in income tax expense of $3.3 million, non-interest expense of $1.8 million and provision for loan losses of $390,000, partially offset by increases in net interest income of $3.6 million and non-interest income of $1.3 million. In addition to the decrease in net income, diluted earnings per share decreased due to the stock issued in the Lafayette and Wolverine acquisitions. The increase in income tax expense was primarily due to the $2.4 million adjustment of Horizon’s net deferred tax assets to the new corporate tax rate. The increase in non-interest income reflects the finalized entries of the Lafayette acquisition which resulted in a gain on the accounting for Horizon’s previous equity interest in Lafayette of $530,000. Also, fiduciary activities income increased $255,000 from the third quarter to the fourth quarter.
The increase in net income and diluted earnings per share from the fourth quarter of 2016 to the same 2017 period reflects an increase in net interest income of $10.5 million, partially offset by increases in income tax expense of $4.1 million, non-interest expense of $3.7 million, provision for loan losses of $477,000 and average diluted shares outstanding. The majority of the increase in income tax expense was due to the $2.4 million adjustment of Horizon’s net deferred tax assets to the new corporate tax rate. Gains on the sale of investment securities decreased $961,000 from the fourth quarter of 2016 to the same period in 2017, partially offset by the gain on the accounting for Horizon’s previous equity interest in Lafayette of $530,000.
Net income for the year ended December 31, 2017 was $33.1 million, or $1.43 diluted earnings per share, compared to $23.9 million, or $1.19 diluted earnings per share, for the year ended December 31, 2016. The increase in net income and diluted earnings per share from 2016 to 2017 reflects an increase in net interest income of $26.1 million offset by a decrease in non-interest income of $2.3 million and increases in non-interest expense of $7.9 million, income tax expense of $6.0 million and provision for loan losses of $628,000. Core net income for the year ended December 31, 2017 was $35.5 million, or $1.53 diluted earnings per share, compared to $29.2 million, or $1.45 diluted earnings per share, for the year ended December 31, 2016.
| Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share | ||||||||||||
| (Dollars in Thousands Except per Share Data) | ||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||
| December 31 | December 31 | |||||||||||
| Non-GAAP Reconciliation of Net Income | 2017 | 2016 | 2017 | 2016 | ||||||||
| (Unaudited) | (Unaudited) | |||||||||||
| Net income as reported | $ | 7,650 | $ | 5,603 | $ | 33,117 | $ | 23,912 | ||||
| Merger expenses | 1,444 | 1,354 | 3,656 | 6,827 | ||||||||
| Tax effect | (418 | ) | (416 | ) | (1,003 | ) | (1,998 | ) | ||||
| Net income excluding merger expenses | 8,676 | 6,541 | 35,770 | 28,741 | ||||||||
| Gain on sale of investment securities | - | (961 | ) | (38 | ) | (1,836 | ) | |||||
| Tax effect | - | 336 | 13 | 643 | ||||||||
| Net income excluding gain on sale of investment securities | 8,676 | 5,916 | 35,745 | 27,548 | ||||||||
| Prepayment penalties on borrowings | - | 4,839 | - | 4,839 | ||||||||
| Tax effect | - | (1,694 | ) | - | (1,694 | ) | ||||||
| Net income excluding prepayment penalties on borrowings | 8,676 | 9,061 | 35,745 | 30,693 | ||||||||
| Gain on remeasurement of equity interest in Lafayette | (530 | ) | - | (530 | ) | - | ||||||
| Tax effect | 78 | - | 78 | - | ||||||||
| Net income excluding gain on remeasurement of equity interest in Lafayette | 8,224 | 9,061 | 35,293 | 30,693 | ||||||||
| Tax reform bill impact | 2,426 | - | 2,426 | - | ||||||||
| Net income excluding tax reform bill impact | 10,650 | 9,061 | 37,719 | 30,693 | ||||||||
| Acquisition-related purchase accounting adjustments ("PAUs") | (868 | ) | (900 | ) | (3,484 | ) | (2,304 | ) | ||||
| Tax effect | 304 | 315 | 1,219 | 807 | ||||||||
| Net income excluding (PAUs) | $ | 10,086 | $ | 8,476 | $ | 35,454 | $ | 29,196 | ||||
| Non-GAAP Reconciliation of Diluted Earnings per Share | ||||||||||||
| Diluted earnings per share as reported | $ | 0.30 | $ | 0.25 | $ | 1.43 | $ | 1.19 | ||||
| Merger expenses | 0.06 | 0.06 | 0.16 | 0.34 | ||||||||
| Tax effect | (0.02 | ) | (0.02 | ) | (0.04 | ) | (0.10 | ) | ||||
| Diluted earnings per share excluding merger expenses | 0.34 | 0.29 | 1.55 | 1.43 | ||||||||
| Gain on sale of investment securities | - | (0.04 | ) | - | (0.09 | ) | ||||||
| Tax effect | - | 0.02 | - | 0.03 | ||||||||
| Diluted earnings per share excluding gain on sale of investment securities | 0.34 | 0.27 | 1.55 | 1.37 | ||||||||
| Prepayment penalties on borrowings | - | 0.22 | - | 0.24 | ||||||||
| Tax effect | - | (0.08 | ) | - | (0.08 | ) | ||||||
| Diluted earnings per share excluding prepayment penalties on borrowings | 0.34 | 0.41 | 1.55 | 1.53 | ||||||||
| Gain on remeasurement of equity interest in Lafayette | (0.02 | ) | - | (0.02 | ) | - | ||||||
| Tax effect | - | - | - | - | ||||||||
| Diluted earnings per share excluding gain on remeasurement of equity interest in Lafayette | 0.32 | 0.41 | 1.53 | 1.53 | ||||||||
| Tax reform bill impact | 0.10 | - | 0.10 | - | ||||||||
| Diluted earnings per share excluding tax reform bill impact | 0.42 | 0.41 | 1.63 | 1.53 | ||||||||
| Acquisition-related PAUs | (0.03 | ) | (0.04 | ) | (0.15 | ) | (0.11 | ) | ||||
| Tax effect | 0.01 | 0.01 | 0.05 | 0.03 | ||||||||
| Diluted earnings per share excluding PAUs | $ | 0.40 | $ | 0.38 | $ | 1.53 | $ | 1.45 | ||||
Horizon’s net interest margin remained at 3.71% for the fourth quarter of 2017 when compared to the prior quarter and increased from 2.92% for the fourth quarter of 2016. The increase in net interest margin reflects a decrease in the cost of interest-bearing liabilities of 66 basis points and an increase in the yield of interest-earning assets of 25 basis points. The decrease in the cost of interest-bearing liabilities 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. The increase in the yield of interest-earning assets was due to an increase in the yield on taxable investment securities and loans receivable of 28 and 6 basis points, respectively. Excluding prepayment penalties on borrowings and acquisition-related purchase accounting adjustments (“core net interest margin”), the margin was 3.61% for the fourth quarter of 2017 compared to 3.63% for the prior quarter and 3.45% for the fourth quarter of 2016. Interest expense from the prepayment penalties on borrowings was $4.8 million during the three months ended December 31, 2016. Interest income from acquisition-related purchase accounting adjustments was $868,000, $661,000 and $900,000 for the three months ended December 31, 2017, September 30, 2017 and December 31, 2016, respectively.
Horizon’s net interest margin increased to 3.75% for the year ended December 31, 2017 compared to 3.29% for the year ended December 31, 2016. The increase in net interest margin reflects a decrease in the cost of interest-bearing liabilities of 26 basis points and an increase in the yield of interest-earning assets of 24 basis points. The decrease in the cost of interest-bearing liabilities was primarily due to Horizon’s balance sheet restructuring transaction completed in the fourth quarter of 2016 resulting in a decrease of 116 basis points in the cost of borrowings when comparing 2017 to 2016. The increase in the yield on interest-earning assets was due to a 12 basis point increase in the yield on loans receivable and an 11 basis point increase on taxable investment securities. Core net interest margin increased to 3.64% for the year ended December 31, 2017 compared to 3.38% for the year ended December 31, 2016. Interest expense from the prepayment penalties on borrowings was $4.8 million during 2016. Interest income from acquisition-related purchase accounting adjustments was $3.5 million and $2.3 million for the year ended December 31, 2017 and 2016, respectively.
| Non-GAAP Reconciliation of Net Interest Margin | |||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| December 31 | September 30 | December 31 | December 31 | ||||||||||||
| Net Interest Margin As Reported | 2017 | 2017 | 2016 | 2017 | 2016 | ||||||||||
| Net interest income | $ | 31,455 | $ | 27,879 | $ | 20,939 | $ | 112,100 | $ | 85,992 | |||||
| Average interest-earning assets | 3,471,169 | 3,078,611 | 2,932,145 | 3,074,464 | 2,683,383 | ||||||||||
| Net interest income as a percent of average interest- | |||||||||||||||
| earning assets ("Net Interest Margin") | 3.71 | % | 3.71 | % | 2.92 | % | 3.75 | % | 3.29 | % | |||||
| Impact of Prepayment Penalties on Borrowings | |||||||||||||||
| Interest expense from prepayment penalties on | |||||||||||||||
| borrowings | $ | - | $ | - | $ | 4,839 | $ | - | $ | 4,839 | |||||
| Impact of Acquisitions | |||||||||||||||
| Interest income from acquisition-related | |||||||||||||||
| purchase accounting adjustments | $ | (868 | ) | $ | (661 | ) | $ | (900 | ) | $ | (3,484 | ) | $ | (2,304 | ) |
| Excluding Impact of Prepayment Penalties and Acquisitions | |||||||||||||||
| Net interest income | $ | 30,587 | $ | 27,218 | $ | 24,878 | $ | 108,616 | $ | 88,527 | |||||
| Average interest-earning assets | 3,471,169 | 3,078,611 | 2,932,145 | 3,074,464 | 2,683,383 | ||||||||||
| Core Net Interest Margin | 3.61 | % | 3.63 | % | 3.45 | % | 3.64 | % | 3.38 | % | |||||
Lending Activity
Total loans increased $405.6 million from $2.429 billion as of September 30, 2017 to $2.835 billion as of December 31, 2017 as commercial loans increased by $344.1 million, residential mortgage loans increased by $35.7 million and consumer loans increased by $27.4 million. Total loans, excluding acquired loans, mortgage warehouse loans and loans held for sale increased by $96.5 million when compared to September 30, 2017.
| Loan Growth by Type, Excluding Acquired Loans | |||||||||||||||
| Three Months Ended December 31, 2017 | |||||||||||||||
| (Dollars in Thousands) | |||||||||||||||
| Excluding Acquired Loans | |||||||||||||||
| December 31 | September 30 | Amount | Acquired | Amount | Percent | ||||||||||
| 2017 | 2017 | Change | Loans | Change | Change | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||
| Commercial loans | $ | 1,617,870 | $ | 1,273,790 | $ | 344,080 | $ | (276,167 | ) | $ | 67,913 | 5.3 | % | ||
| Residential mortgage loans | 606,760 | 571,062 | 35,698 | (30,603 | ) | 5,095 | 0.9 | % | |||||||
| Consumer loans | 512,857 | 485,490 | 27,367 | (3,897 | ) | 23,470 | 4.8 | % | |||||||
| Subtotal | 2,737,487 | 2,330,342 | 407,145 | (310,667 | ) | 96,478 | 4.1 | % | |||||||
| Held for sale loans | 3,094 | 3,616 | (522 | ) | - | (522 | ) | -14.4 | % | ||||||
| Mortgage warehouse loans | 94,508 | 95,483 | (975 | ) | - | (975 | ) | -1.0 | % | ||||||
| Total loans | $ | 2,835,089 | $ | 2,429,441 | $ | 405,648 | $ | (310,667 | ) | $ | 94,981 | 3.9 | % | ||
Total loans increased $691.0 million to $2.835 billion at December 31, 2017 from $2.144 billion at December 31, 2016 as commercial loans increased by $547.9 million, consumer loans increased by $114.4 million and residential mortgage loans increased by $74.9 million, partially offset by a decrease in mortgage warehouse loans of $41.2 million and loans held for sale of $5.0 million. Total loans, excluding acquired loans, mortgage warehouse loans and loans held for sale, increased by a rate of 14.4%, or $288.9 million, during 2017.
| Loan Growth by Type, Excluding Acquired Loans | |||||||||||||||
| Twelve Months Ended December 31, 2017 | |||||||||||||||
| (Dollars in Thousands) | |||||||||||||||
| Excluding Acquired Loans | |||||||||||||||
| December 31 | December 31 | Amount | Acquired | Amount | Percent | ||||||||||
| 2017 | 2016 | Change | Loans | Change | Change | ||||||||||
| (Unaudited) | |||||||||||||||
| Commercial loans | $ | 1,617,870 | $ | 1,069,956 | $ | 547,914 | $ | (395,167 | ) | $ | 152,747 | 14.3 | % | ||
| Residential mortgage loans | 606,760 | 531,874 | 74,886 | (43,423 | ) | 31,463 | 5.9 | % | |||||||
| Consumer loans | 512,857 | 398,429 | 114,428 | (9,739 | ) | 104,689 | 26.3 | % | |||||||
| Subtotal | 2,737,487 | 2,000,259 | 737,228 | (448,329 | ) | 288,899 | 14.4 | % | |||||||
| Held for sale loans | 3,094 | 8,087 | (4,993 | ) | - | (4,993 | ) | -61.7 | % | ||||||
| Mortgage warehouse loans | 94,508 | 135,727 | (41,219 | ) | - | (41,219 | ) | -30.4 | % | ||||||
| Total loans | $ | 2,835,089 | $ | 2,144,073 | $ | 691,016 | $ | (448,329 | ) | $ | 242,687 | 11.3 | % | ||
Residential mortgage lending activity for the three months ended December 31, 2017 generated $2.0 million in income from the gain on sale of mortgage loans, an increase of $37,000 from the previous quarter and a decrease of $612,000 from the same period in 2016. Total origination volume for the fourth quarter of 2017, including loans placed into portfolio, totaled $90.1 million, representing a decrease of 5.3% from the previous quarter and a decrease of 24.0% from the same period in 2016.
Residential mortgage lending activity for the year ended December 31, 2017 generated $7.9 million in income from the gain on sale of mortgage loans, a decrease of $3.4 million when compared to the year ended December 31, 2016. Total origination volume for the year ended December 31, 2017, including loans placed into portfolio, totaled $361.5 million, a decrease of 21.4% compared to the year ended December 31, 2016.
The decrease in mortgage loan origination volume was primarily due to a decrease in mortgage loan refinance activity when comparing 2017 to 2016. Purchase money mortgage originations during the fourth quarter of 2017 represented 73.7% of total originations compared to 80.2% of originations during the previous quarter and 65.7% during the fourth quarter of 2016. Purchase money mortgage originations for the year ended December 31, 2017 represented 76.1% of originations compared to 69.5% for the year ended December 31, 2016.
The provision for loan losses totaled $1.1 million for the fourth quarter of 2017 compared to $710,000 for the third quarter of 2017 and $623,000 for the fourth quarter of 2016. The provision for loan losses totaled $2.5 million and $1.8 million for the years ended December 31, 2017 and 2016, respectively. The increase in the provision for loan losses in 2017 was due to additional allocations for loan growth in new markets and an increase in allocation for agricultural economic factors.
The ratio of the allowance for loan losses to total loans decreased to 0.58% as of December 31, 2017 from 0.69% as of December 31, 2016 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 0.81% as of December 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 were 1.23% as of December 31, 2017 compared to 1.39% as of December 31, 2016.
| Non-GAAP Allowance for Loan and Lease Loss Detail | ||||||||||||||||||||||||||||||
| As of December 31, 2017 | ||||||||||||||||||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||||||||||||||||||
| Horizon | ||||||||||||||||||||||||||||||
| Legacy | Heartland | Summit | Peoples | Kosciusko | LaPorte | CNB | Lafayette | Wolverine | Total | |||||||||||||||||||||
| Pre-discount loan balance | $ | 2,019,194 | $ | 11,646 | $ | 40,995 | $ | 113,171 | $ | 60,497 | $ | 142,824 | $ | 6,583 | $ | 144,444 | $ | 311,313 | $ | 2,850,667 | ||||||||||
| Allowance for loan losses (ALLL) | 16,394 | - | - | - | - | - | - | - | - | 16,394 | ||||||||||||||||||||
| Loan discount | N/A | 800 | 2,241 | 2,754 | 758 | 3,796 | 167 | 3,226 | 4,930 | 18,672 | ||||||||||||||||||||
| ALLL + loan discount | 16,394 | 800 | 2,241 | 2,754 | 758 | 3,796 | 167 | 3,226 | 4,930 | 35,066 | ||||||||||||||||||||
| Loans, net | $ | 2,002,800 | $ | 10,846 | $ | 38,754 | $ | 110,417 | $ | 59,739 | $ | 139,028 | $ | 6,416 | $ | 141,218 | $ | 306,383 | $ | 2,815,601 | ||||||||||
| ALLL/pre-discount loan balance | 0.81 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.58 | % | ||||||||||
| Loan discount/pre-discount loan balance | N/A | 6.87 | % | 5.47 | % | 2.43 | % | 1.25 | % | 2.66 | % | 2.54 | % | 2.23 | % | 1.58 | % | 0.66 | % | |||||||||||
| ALLL +loan discount/pre-discount loan balance | 0.81 | % | 6.87 | % | 5.47 | % | 2.43 | % | 1.25 | % | 2.66 | % | 2.54 | % | 2.23 | % | 1.58 | % | 1.23 | % | ||||||||||
Non-performing loans to total loans increased 8 basis points to 0.58% at December 31, 2017 from 0.50% at December 31, 2016. Non-performing loans totaled $16.4 million as of December 31, 2017, an increase of $5.7 million from $10.7 million as of December 31, 2016. Compared to December 31, 2016, non-performing commercial loans increased by $4.7 million, non-performing real estate loans increased by $694,000 and non-performing consumer loans increased by $328,000. The increase in non-performing loans was driven primarily by loans acquired from Lafayette Community Bank and Wolverine Bank.
Expense Management
Total non-interest expense was $1.8 million higher in the fourth quarter of 2017 when compared to the previous quarter. Excluding merger-related expenses of $1.4 million and $2.0 million during the three months ended December 31, 2017 and September 30, 2017, respectively, total non-interest expense increased $2.3 million, or 10.4%. The increase was primarily due to an increase in salaries and employee benefits of $1.4 million due to additional compensation expenses related to performance based incentive plans and the recent Wolverine acquisition. Other expense increased $338,000 reflecting overall company growth, market expansion and recent acquisitions. Outside services and consultant expense decreased $447,000 due to a lower amount of merger-related expenses incurred during the fourth quarter of 2017 when compared to the previous quarter. In addition, the cost savings anticipated from the Lafayette and Wolverine acquisitions were not yet fully realized during the fourth quarter of 2017. We expect the cost savings from these acquisitions will start to be fully realized in the first quarter of 2018.
Total non-interest expense was $3.7 million higher in the fourth quarter of 2017 compared to the same period of 2016. Excluding merger-related expenses of $1.4 million recorded in both quarters ended December 31, 2017 and 2016, total non-interest expense increased $3.6 million, or 17.0%. The increase was primarily due to an increase in salaries and employee benefits of $2.9 million, other expenses of $390,000, net occupancy expenses of $176,000, outside services and consultants expense of $147,000 and professional fees of $131,000. The increase in salaries and employee benefits reflects additional compensation expense related to performance based incentive plans, overall company growth and recent acquisitions. Other expenses and net occupancy expenses increased as a result of market expansions and acquisitions. The increase in outside services and consultants expense and professional fees was due to a higher amount of merger-related expenses during the fourth quarter of 2017 when compared to the same period of 2016. Finally, the cost savings anticipated from the Lafayette and Wolverine acquisitions were not yet fully realized during the fourth quarter of 2017. We expect the cost savings from these acquisitions will start to be fully realized in the first quarter of 2018.
Total non-interest expense for the year ended December 31, 2017 increased $7.9 million when compared to the year ended December 31, 2016. Excluding merger-related expenses of $3.7 million and $6.8 million recorded during the year ended December 31, 2017 and 2016, respectively, total non-interest expense increased $11.1 million. The increase was primarily due to increases in salaries and employee benefits of $7.4 million, net occupancy expenses of $1.2 million, other expenses of $1.3 million and data processing expenses of $547,000, partially offset by decreases in outside services and consultants expense of $845,000, loan expense of $612,000, FDIC insurance expense of $513,000, other losses of $316,000 and professional fees of $262,000. The increase in salaries and employee benefits expense reflects additional compensation expense related to performance based incentive plans, overall company growth and recent acquisitions. Net occupancy expenses, other expenses and data processing expenses increased primarily due to overall company growth, market expansions and acquisitions. Outside services and consultants expense and professional fees decreased due to a lower amount of merger-related expenses in 2017 compared to 2016. The decrease in loan expense reflects a decrease in loan collection expenses when comparing 2017 to 2016. The reduced assessment rate schedule implemented by the FDIC in the fourth quarter of 2016 resulted in the decrease of FDIC insurance expense in 2017. Other losses decreased primarily due to lower debit card fraud-related expenses in 2017.
Income tax expense totaled $5.8 million for the fourth quarter of 2017, an increase of $3.3 million and $4.1 million when compared to the third quarter of 2017 and fourth quarter of 2016, respectively. The increase 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. Also reflected in this increase in income tax expense is an increase of $2.7 million and $6.2 million in income before income taxes when comparing the fourth quarter of 2017 to the previous quarter and the fourth quarter of 2016, respectively.
Income tax expense increased $6.0 million for the year ended December 31, 2017 compared to the year ended December 31, 2016. The majority of this increase was due to an increase in income before taxes of $15.2 million during 2017. Also reflected in this increase is the adjustment to Horizon’s net deferred tax asset of $2.4 million recorded during the fourth quarter of 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 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 and the return on average assets. 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) | ||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | ||||||
| Total stockholders' equity | $ | 457,078 | $ | 392,055 | $ | 357,259 | $ | 348,575 | $ | 340,855 |
| Less: Intangible assets | 132,282 | 103,244 | 86,726 | 87,094 | 86,307 | |||||
| Total tangible stockholders' equity | $ | 324,796 | $ | 288,811 | $ | 270,533 | $ | 261,481 | $ | 254,548 |
| Common shares outstanding | 25,529,819 | 23,325,459 | 22,176,465 | 22,176,465 | 22,171,596 | |||||
| Tangible book value per common share | $ | 12.72 | $ | 12.38 | $ | 12.20 | $ | 11.79 | $ | 11.48 |
| Non-GAAP Reconciliation of Return on Average Assets | ||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||
| December 31 | December 31 | |||||||||||
| Non-GAAP Reconciliation of Net Income | 2017 | 2016 | 2017 | 2016 | ||||||||
| Average Assets | $ | 3,841,551 | $ | 3,241,750 | $ | 3,396,873 | $ | 2,961,622 | ||||
| Net income as reported | 7,650 | 5,603 | 33,117 | 23,912 | ||||||||
| Merger expenses | 1,444 | 1,354 | 3,656 | 6,827 | ||||||||
| Tax effect | (418 | ) | (416 | ) | (1,003 | ) | (1,998 | ) | ||||
| Net income excluding merger expenses | 8,676 | 6,541 | 35,770 | 28,741 | ||||||||
| Gain on sale of investment securities | - | (961 | ) | (38 | ) | (1,836 | ) | |||||
| Tax effect | - | 336 | 13 | 643 | ||||||||
| Net income excluding gain on sale of investment securities | 8,676 | 5,916 | 35,745 | 27,548 | ||||||||
| Prepayment penalties on borrowings | - | 4,839 | - | 4,839 | ||||||||
| Tax effect | - | (1,694 | ) | - | (1,694 | ) | ||||||
| Net income excluding prepayment penalties on borrowings | 8,676 | 9,061 | 35,745 | 30,693 | ||||||||
| Gain on remeasurement of equity interest in Lafayette | (530 | ) | - | (530 | ) | - | ||||||
| Tax effect | 78 | - | 78 | - | ||||||||
| Net income excluding gain on remeasurement of equity interest in Lafayette | 8,224 | 9,061 | 35,293 | 30,693 | ||||||||
| Tax reform bill impact | 2,426 | - | 2,426 | - | ||||||||
| Net income excluding tax reform bill impact | 10,650 | 9,061 | 37,719 | 30,693 | ||||||||
| Acquisition-related purchase accounting adjustments (PAUs) | (868 | ) | (900 | ) | (3,484 | ) | (2,304 | ) | ||||
| Tax effect | 304 | 315 | 1,219 | 807 | ||||||||
| Net income excluding PAUs | $ | 10,086 | $ | 8,476 | $ | 35,454 | $ | 29,196 | ||||
| Non-GAAP Reconciliation of Return on Average Assets | ||||||||||||
| Return on average assets as reported | 0.79 | % | 0.69 | % | 0.97 | % | 0.81 | % | ||||
| Merger expenses | 0.15 | % | 0.17 | % | 0.11 | % | 0.23 | % | ||||
| Tax effect | -0.04 | % | -0.05 | % | -0.03 | % | -0.07 | % | ||||
| Return on average assets excluding merger expenses | 0.90 | % | 0.81 | % | 1.05 | % | 0.97 | % | ||||
| Gain on sale of investment securities | 0.00 | % | -0.12 | % | 0.00 | % | -0.06 | % | ||||
| Tax effect | 0.00 | % | 0.04 | % | 0.00 | % | 0.02 | % | ||||
| Return on average assets excluding gain on sale of investment securities | 0.90 | % | 0.73 | % | 1.05 | % | 0.93 | % | ||||
| Prepayment penalties on borrowings | 0.00 | % | 0.60 | % | 0.00 | % | 0.17 | % | ||||
| Tax effect | 0.00 | % | -0.21 | % | 0.00 | % | -0.06 | % | ||||
| Return on average assets excluding prepayment penalties on borrowings | 0.90 | % | 1.12 | % | 1.05 | % | 1.04 | % | ||||
| Gain on remeasurement of equity interest in Lafayette | -0.05 | % | 0.00 | % | -0.02 | % | 0.00 | % | ||||
| Tax effect | 0.01 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||
| Return on average assets excluding gain on remeasurement of equity interest in Lafayette | 0.86 | % | 1.12 | % | 1.03 | % | 1.04 | % | ||||
| Tax reform bill impact | 0.25 | % | 0.00 | % | 0.07 | % | 0.00 | % | ||||
| Return on average assets excluding tax reform bill impact | 1.11 | % | 1.12 | % | 1.10 | % | 1.04 | % | ||||
| Acquisition-related PAUs | -0.09 | % | -0.11 | % | -0.10 | % | -0.08 | % | ||||
| Tax effect | 0.03 | % | 0.04 | % | 0.04 | % | 0.03 | % | ||||
| Return on average assets excluding PAUs | 1.05 | % | 1.05 | % | 1.04 | % | 0.99 | % | ||||
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) | |||||||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | |||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||
| Balance sheet: | |||||||||||||||
| Total assets | $ | 3,964,303 | $ | 3,519,501 | $ | 3,321,178 | $ | 3,169,643 | $ | 3,141,156 | |||||
| Investment securities | 710,113 | 708,449 | 704,525 | 673,090 | 633,025 | ||||||||||
| Commercial loans | 1,617,870 | 1,273,790 | 1,143,761 | 1,106,471 | 1,069,956 | ||||||||||
| Mortgage warehouse loans | 94,508 | 95,483 | 123,757 | 89,360 | 135,727 | ||||||||||
| Residential mortgage loans | 606,760 | 571,062 | 549,997 | 533,646 | 531,874 | ||||||||||
| Consumer loans | 512,857 | 485,490 | 450,209 | 417,476 | 398,429 | ||||||||||
| Earnings assets | 3,563,307 | 3,153,230 | 2,990,924 | 2,845,922 | 2,801,030 | ||||||||||
| Non-interest bearing deposit accounts | 601,805 | 563,536 | 508,305 | 502,400 | 496,248 | ||||||||||
| Interest bearing transaction accounts | 1,712,246 | 1,536,169 | 1,401,407 | 1,432,228 | 1,499,120 | ||||||||||
| Time deposits | 566,952 | 508,570 | 452,208 | 509,071 | 475,842 | ||||||||||
| Borrowings | 564,157 | 458,152 | 485,304 | 319,993 | 267,489 | ||||||||||
| Subordinated debentures | 37,653 | 37,607 | 37,562 | 37,516 | 37,456 | ||||||||||
| Total stockholders' equity | 457,078 | 392,055 | 357,259 | 348,575 | 340,855 | ||||||||||
| Income statement: | Three months ended | ||||||||||||||
| Net interest income | $ | 31,455 | $ | 27,879 | $ | 27,198 | $ | 25,568 | $ | 20,939 | |||||
| Provision for loan losses | 1,100 | 710 | 330 | 330 | 623 | ||||||||||
| Non-interest income | 9,344 | 8,021 | 8,212 | 7,559 | 9,484 | ||||||||||
| Non-interest expenses | 26,291 | 24,513 | 22,488 | 21,521 | 22,588 | ||||||||||
| Income tax expense | 5,758 | 2,506 | 3,520 | 3,052 | 1,609 | ||||||||||
| Net income | 7,650 | 8,171 | 9,072 | 8,224 | 5,603 | ||||||||||
| Preferred stock dividend | - | - | - | - | - | ||||||||||
| Net income available to common shareholders | $ | 7,650 | $ | 8,171 | $ | 9,072 | $ | 8,224 | $ | 5,603 | |||||
| Per share data: | |||||||||||||||
| Basic earnings per share (1) | $ | 0.30 | $ | 0.36 | $ | 0.41 | $ | 0.37 | $ | 0.25 | |||||
| Diluted earnings per share (1) | 0.30 | 0.36 | 0.41 | 0.37 | 0.25 | ||||||||||
| Cash dividends declared per common share (1) | 0.13 | 0.13 | 0.13 | 0.11 | 0.11 | ||||||||||
| Book value per common share (1) | 17.90 | 16.81 | 16.11 | 15.72 | 15.37 | ||||||||||
| Tangible book value per common share (1) | 12.72 | 12.38 | 12.20 | 11.79 | 11.48 | ||||||||||
| Market value - high | 29.21 | 29.17 | 27.50 | 28.09 | 28.41 | ||||||||||
| Market value - low | $ | 25.99 | $ | 25.30 | $ | 24.73 | $ | 24.91 | $ | 17.84 | |||||
| Weighted average shares outstanding - Basic | 25,140,800 | 22,580,160 | 22,176,465 | 22,175,526 | 22,155,549 | ||||||||||
| Weighted average shares outstanding - Diluted | 25,264,675 | 22,715,273 | 22,322,390 | 22,326,071 | 22,283,722 | ||||||||||
| Key ratios: | |||||||||||||||
| Return on average assets | 0.79 | % | 0.96 | % | 1.12 | % | 1.07 | % | 0.69 | % | |||||
| Return on average common stockholders' equity | 6.75 | 8.92 | 10.24 | 9.66 | 6.49 | ||||||||||
| Net interest margin | 3.71 | 3.71 | 3.84 | 3.80 | 2.92 | ||||||||||
| Loan loss reserve to total loans | 0.58 | 0.64 | 0.66 | 0.70 | 0.69 | ||||||||||
| Non-performing loans to loans | 0.58 | 0.51 | 0.51 | 0.46 | 0.50 | ||||||||||
| Average equity to average assets | 11.70 | 10.74 | 10.94 | 11.12 | 10.59 | ||||||||||
| Bank only capital ratios: | |||||||||||||||
| Tier 1 capital to average assets | 9.94 | 9.90 | 9.87 | 10.26 | 9.93 | ||||||||||
| Tier 1 capital to risk weighted assets | 12.18 | 12.33 | 12.82 | 13.40 | 13.33 | ||||||||||
| Total capital to risk weighted assets | 12.72 | 12.93 | 13.44 | 14.05 | 13.98 | ||||||||||
| Loan data: | |||||||||||||||
| Substandard loans | $ | 46,162 | $ | 36,883 | $ | 34,870 | $ | 30,865 | $ | 30,361 | |||||
| 30 to 89 days delinquent | 9,329 | 6,284 | 4,555 | 5,476 | 6,315 | ||||||||||
| 90 days and greater delinquent - accruing interest | $ | 167 | $ | 162 | $ | 160 | $ | 245 | $ | 241 | |||||
| Trouble debt restructures - accruing interest | 1,958 | 2,015 | 1,924 | 1,647 | 1,492 | ||||||||||
| Trouble debt restructures - non-accrual | 1,013 | 1,192 | 668 | 998 | 1,014 | ||||||||||
| Non-accrual loans | 13,276 | 9,065 | 8,811 | 6,944 | 7,936 | ||||||||||
| Total non-performing loans | $ | 16,414 | $ | 12,434 | $ | 11,563 | $ | 9,834 | $ | 10,683 | |||||
| (1) Adjusted for 3:2 stock split on November 14, 2016 | |||||||||||||||
| HORIZON BANCORP | ||||||
| Financial Highlights | ||||||
| (Dollars in thousands except share and per share data and ratios, Unaudited) | ||||||
| December 31 | December 31 | |||||
| 2017 | 2016 | |||||
| Balance sheet: | ||||||
| Total assets | $ | 3,964,303 | $ | 3,141,156 | ||
| Investment securities | 710,113 | 633,025 | ||||
| Commercial loans | 1,617,870 | 1,069,956 | ||||
| Mortgage warehouse loans | 94,508 | 135,727 | ||||
| Residential mortgage loans | 606,760 | 531,874 | ||||
| Consumer loans | 512,857 | 398,429 | ||||
| Earnings assets | 3,563,307 | 2,801,030 | ||||
| Non-interest bearing deposit accounts | 601,805 | 496,248 | ||||
| Interest bearing transaction accounts | 1,712,246 | 1,499,120 | ||||
| Time deposits | 566,952 | 475,842 | ||||
| Borrowings | 564,157 | 267,489 | ||||
| Subordinated debentures | 37,653 | 37,456 | ||||
| Total stockholders' equity | 457078 | 340855 | ||||
| Income statement: | Twelve months ended | |||||
| Net interest income | $ | 112,100 | $ | 85,992 | ||
| Provision for loan losses | 2,470 | 1,842 | ||||
| Non-interest income | 33,136 | 35,455 | ||||
| Non-interest expenses | 94,813 | 86,892 | ||||
| Income tax expense | 14,836 | 8,801 | ||||
| Net income | 33,117 | 23,912 | ||||
| Preferred stock dividend | - | (42 | ) | |||
| Net income available to common shareholders | $ | 33,117 | $ | 23,870 | ||
| Per share data: | ||||||
| Basic earnings per share (1) | $ | 1.44 | $ | 1.19 | ||
| Diluted earnings per share (1) | 1.43 | 1.19 | ||||
| Cash dividends declared per common share (1) | 0.50 | 0.41 | ||||
| Book value per common share (1) | 17.90 | 15.37 | ||||
| Tangible book value per common share (1) | 12.72 | 11.48 | ||||
| Market value - high | 29.21 | 28.41 | ||||
| Market value - low | $ | 24.73 | $ | 15.41 | ||
| Weighted average shares outstanding - Basic | 23,035,824 | 19,987,728 | ||||
| Weighted average shares outstanding - Diluted | 23,183,287 | 20,082,410 | ||||
| Key ratios: | ||||||
| Return on average assets | 0.97 | % | 0.81 | % | ||
| Return on average common stockholders' equity | 8.74 | 7.92 | ||||
| Net interest margin | 3.75 | 3.29 | ||||
| Loan loss reserve to total loans | 0.58 | 0.69 | ||||
| Non-performing loans to loans | 0.58 | 0.50 | ||||
| Average equity to average assets | 11.15 | 10.22 | ||||
| Bank only capital ratios: | ||||||
| Tier 1 capital to average assets | 9.94 | 9.93 | ||||
| Tier 1 capital to risk weighted assets | 12.18 | 13.33 | ||||
| Total capital to risk weighted assets | 12.72 | 13.98 | ||||
| Loan data: | ||||||
| Substandard loans | $ | 46,162 | $ | 30,361 | ||
| 30 to 89 days delinquent | 9,329 | 6,315 | ||||
| 90 days and greater delinquent - accruing interest | $ | 167 | $ | 241 | ||
| Trouble debt restructures - accruing interest | 1,958 | 1,492 | ||||
| Trouble debt restructures - non-accrual | 1,013 | 1,014 | ||||
| Non-accrual loans | 13,276 | 7,936 | ||||
| Total non-performing loans | $ | 16,414 | $ | 10,683 | ||
| (1) Adjusted for 3:2 stock split on November 14, 2016 | ||||||
| HORIZON BANCORP | ||||||||||||||
| Allocation of the Allowance for Loan and Lease Losses | ||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||
| Commercial | $ | 8,634 | $ | 7,877 | $ | 7,617 | $ | 7,600 | $ | 6,579 | ||||
| Real estate | 2,188 | 2,129 | 1,750 | 1,697 | 2,090 | |||||||||
| Mortgage warehousing | 1,030 | 1,048 | 1,090 | 1,042 | 1,254 | |||||||||
| Consumer | 4,542 | 4,532 | 4,570 | 4,715 | 4,914 | |||||||||
| Total | $ | 16,394 | $ | 15,586 | $ | 15,027 | $ | 15,054 | $ | 14,837 | ||||
| Net Charge-offs (Recoveries) | ||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||
| Commercial | $ | 50 | $ | 169 | $ | 24 | $ | (134 | ) | $ | 49 | |||
| Real estate | (9 | ) | 24 | (8 | ) | 38 | 64 | |||||||
| Mortgage warehousing | - | - | - | - | - | |||||||||
| Consumer | 251 | (42 | ) | 341 | 209 | 197 | ||||||||
| Total | $ | 292 | $ | 151 | $ | 357 | $ | 113 | $ | 310 | ||||
| Total Non-performing Loans | ||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||
| Commercial | $ | 7,141 | $ | 3,869 | $ | 2,794 | $ | 1,530 | $ | 2,432 | ||||
| Real estate | 5,716 | 5,545 | 5,285 | 5,057 | 5,022 | |||||||||
| Mortgage warehousing | - | - | - | - | - | |||||||||
| Consumer | 3,557 | 3,456 | 3,484 | 3,247 | 3,229 | |||||||||
| Total | $ | 16,414 | $ | 12,870 | $ | 11,563 | $ | 9,834 | $ | 10,683 | ||||
| Other Real Estate Owned and Repossessed Assets | ||||||||||||||
| (Dollars in Thousands, Unaudited) | ||||||||||||||
| December 31 | September 30 | June 30 | March 31 | December 31 | ||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||
| Commercial | $ | 578 | $ | 324 | $ | 409 | $ | 542 | $ | 542 | ||||
| Real estate | 200 | 1,443 | 1,805 | 2,413 | 2,648 | |||||||||
| Mortgage warehousing | - | - | - | - | - | |||||||||
| Consumer | 60 | 26 | 21 | 20 | 26 | |||||||||
| Total | $ | 838 | $ | 1,793 | $ | 2,235 | $ | 2,975 | $ | 3,216 | ||||
| HORIZON BANCORP AND SUBSIDIARIES | |||||||||||||||||
| Average Balance Sheets | |||||||||||||||||
| (Dollar Amounts in Thousands, Unaudited) | |||||||||||||||||
| Three Months Ended | Three Months Ended | ||||||||||||||||
| December 31, 2017 | December 31, 2016 | ||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||
| ASSETS | |||||||||||||||||
| Interest-earning assets | |||||||||||||||||
| Federal funds sold | $ | 10,175 | $ | 24 | 0.94 | % | $ | 27,034 | $ | 42 | 0.62 | % | |||||
| Interest-earning deposits | 22,939 | 49 | 0.85 | % | 33,901 | 73 | 0.86 | % | |||||||||
| Investment securities - taxable | 422,864 | 2,196 | 2.06 | % | 496,794 | 2,221 | 1.78 | % | |||||||||
| Investment securities - non-taxable (1) | 309,902 | 1,875 | 3.38 | % | 219,937 | 1,338 | 3.36 | % | |||||||||
| Loans receivable (2)(3) | 2,705,289 | 32,630 | 4.82 | % | 2,154,479 | 25,715 | 4.76 | % | |||||||||
| Total interest-earning assets (1) | 3,471,169 | 36,774 | 4.32 | % | 2,932,145 | 29,389 | 4.07 | % | |||||||||
| Non-interest-earning assets | |||||||||||||||||
| Cash and due from banks | 44,765 | 40,788 | |||||||||||||||
| Allowance for loan losses | (15,692 | ) | (14,593 | ) | |||||||||||||
| Other assets | 341,309 | 283,410 | |||||||||||||||
| $ | 3,841,551 | $ | 3,241,750 | ||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||
| Interest-bearing deposits | $ | 2,278,651 | $ | 2,586 | 0.45 | % | $ | 1,949,549 | $ | 1,693 | 0.35 | % | |||||
| Borrowings | 451,866 | 2,150 | 1.89 | % | 382,177 | 6,199 | 6.45 | % | |||||||||
| Subordinated debentures | 36,431 | 583 | 6.35 | % | 38,084 | 558 | 5.83 | % | |||||||||
| Total interest-bearing liabilities | 2,766,948 | 5,319 | 0.76 | % | 2,369,810 | 8,450 | 1.42 | % | |||||||||
| Non-interest-bearing liabilities | |||||||||||||||||
| Demand deposits | 603,733 | 504,274 | |||||||||||||||
| Accrued interest payable and | |||||||||||||||||
| other liabilities | 21,552 | 24,322 | |||||||||||||||
| Stockholders' equity | 449,318 | 343,344 | |||||||||||||||
| $ | 3,841,551 | $ | 3,241,750 | ||||||||||||||
| Net interest income/spread | $ | 31,455 | 3.55 | % | $ | 20,939 | 2.65 | % | |||||||||
| Net interest income as a percent | |||||||||||||||||
| of average interest earning assets (1) | 3.71 | % | 2.92 | % | |||||||||||||
(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 | |||||||||||||||||
| Average Balance Sheets | |||||||||||||||||
| (Dollar Amounts in Thousands, Unaudited) | |||||||||||||||||
| Twelve Months Ended | Twelve Months Ended | ||||||||||||||||
| December 31, 2017 | December 31, 2016 | ||||||||||||||||
| Average | Average | Average | Average | ||||||||||||||
| Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||
| ASSETS | |||||||||||||||||
| Interest-earning assets | |||||||||||||||||
| Federal funds sold | $ | 5,450 | $ | 80 | 1.47 | % | $ | 17,142 | $ | 95 | 0.55 | % | |||||
| Interest-earning deposits | 23,865 | 301 | 1.26 | % | 34,506 | 278 | 0.81 | % | |||||||||
| Investment securities - taxable | 417,993 | 8,705 | 2.08 | % | 490,274 | 9,666 | 1.97 | % | |||||||||
| Investment securities - non-taxable (1) | 292,030 | 7,068 | 3.39 | % | 192,881 | 4,921 | 3.59 | % | |||||||||
| Loans receivable (2)(3) | 2,335,126 | 112,329 | 4.83 | % | 1,948,580 | 91,569 | 4.71 | % | |||||||||
| Total interest-earning assets (1) | 3,074,464 | 128,483 | 4.29 | % | 2,683,383 | 106,529 | 4.05 | % | |||||||||
| Non-interest-earning assets | |||||||||||||||||
| Cash and due from banks | 42,578 | 37,549 | |||||||||||||||
| Allowance for loan losses | (15,226 | ) | (14,439 | ) | |||||||||||||
| Other assets | 295,057 | 255,129 | |||||||||||||||
| $ | 3,396,873 | $ | 2,961,622 | ||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||
| Interest-bearing deposits | $ | 2,045,896 | $ | 7,901 | 0.39 | % | $ | 1,752,326 | $ | 6,616 | 0.38 | % | |||||
| Borrowings | 381,488 | 6,178 | 1.62 | % | 425,444 | 11,807 | 2.78 | % | |||||||||
| Subordinated debentures | 36,362 | 2,304 | 6.34 | % | 49,834 | 2,114 | 4.24 | % | |||||||||
| Total interest-bearing liabilities | 2,463,746 | 16,383 | 0.66 | % | 2,227,604 | 20,537 | 0.92 | % | |||||||||
| Non-interest-bearing liabilities | |||||||||||||||||
| Demand deposits | 533,852 | 417,900 | |||||||||||||||
| Accrued interest payable and | |||||||||||||||||
| other liabilities | 20,566 | 13,574 | |||||||||||||||
| Stockholders' equity | 378,709 | 302,544 | |||||||||||||||
| $ | 3,396,873 | $ | 2,961,622 | ||||||||||||||
| Net interest income/spread | $ | 112,100 | 3.63 | % | $ | 85,992 | 3.13 | % | |||||||||
| Net interest income as a percent | |||||||||||||||||
| of average interest earning assets (1) | 3.75 | % | 3.29 | % | |||||||||||||
(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) | ||||||
| December 31 | December 31 | |||||
| 2017 | 2016 | |||||
| (Unaudited) | ||||||
| Assets | ||||||
| Cash and due from banks | $ | 76,441 | $ | 70,832 | ||
| Investment securities, available for sale | 509,665 | 439,831 | ||||
| Investment securities, held to maturity (fair value of $201,085 and $194,086) | 200,448 | 193,194 | ||||
| Loans held for sale | 3,094 | 8,087 | ||||
| Loans, net of allowance for loan losses of $16,394 and $14,837 | 2,815,601 | 2,121,149 | ||||
| Premises and equipment, net | 75,529 | 66,357 | ||||
| Federal Reserve and Federal Home Loan Bank stock | 18,105 | 23,932 | ||||
| Goodwill | 119,880 | 76,941 | ||||
| Other intangible assets | 12,402 | 9,366 | ||||
| Interest receivable | 16,244 | 12,713 | ||||
| Cash value of life insurance | 75,931 | 74,134 | ||||
| Other assets | 40,963 | 44,620 | ||||
| Total assets | $ | 3,964,303 | $ | 3,141,156 | ||
| Liabilities | ||||||
| Deposits | ||||||
| Non-interest bearing | $ | 601,805 | $ | 496,248 | ||
| Interest bearing | 2,279,198 | 1,974,962 | ||||
| Total deposits | 2,881,003 | 2,471,210 | ||||
| Borrowings | 564,157 | 267,489 | ||||
| Subordinated debentures | 37,653 | 37,456 | ||||
| Interest payable | 886 | 472 | ||||
| Other liabilities | 23,526 | 23,674 | ||||
| Total liabilities | 3,507,225 | 2,800,301 | ||||
| Commitments and contingent liabilities | ||||||
| Stockholders’ Equity | ||||||
| Preferred stock, Authorized, 1,000,000 shares | ||||||
| Issued 0 and 0 shares | - | - | ||||
| Common stock, no par value | ||||||
| Authorized 66,000,000 shares(1) | ||||||
| Issued, 25,549,069 and 22,192,530 shares(1) | ||||||
| Outstanding, 25,529,819 and 22,171,596 shares(1) | - | - | ||||
| Additional paid-in capital | 275,059 | 182,326 | ||||
| Retained earnings | 185,570 | 164,173 | ||||
| Accumulated other comprehensive loss | (3,551 | ) | (5,644 | ) | ||
| Total stockholders’ equity | 457,078 | 340,855 | ||||
| Total liabilities and stockholders’ equity | $ | 3,964,303 | $ | 3,141,156 | ||
| (1) Adjusted for 3:2 stock split on November 14, 2016 | ||||||
| HORIZON BANCORP AND SUBSIDIARIES | |||||||||
| Condensed Consolidated Statements of Income | |||||||||
| (Dollar Amounts in Thousands, Except Per Share Data, Unaudited) | |||||||||
| Three Months Ended | Twelve Months Ended | ||||||||
| December 31 | December 31 | ||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||
| Interest Income | |||||||||
| Loans receivable | $ | 32,630 | $ | 25,715 | $ | 112,329 | $ | 91,569 | |
| Investment securities | |||||||||
| Taxable | 2,269 | 2,336 | 9,086 | 10,039 | |||||
| Tax exempt | 1,875 | 1,338 | 7,068 | 4,921 | |||||
| Total interest income | 36,774 | 29,389 | 128,483 | 106,529 | |||||
| Interest Expense | |||||||||
| Deposits | 2,586 | 1,693 | 7,901 | 6,616 | |||||
| Borrowed funds | 2,150 | 6,199 | 6,178 | 11,807 | |||||
| Subordinated debentures | 583 | 558 | 2,304 | 2,114 | |||||
| Total interest expense | 5,319 | 8,450 | 16,383 | 20,537 | |||||
| Net Interest Income | 31,455 | 20,939 | 112,100 | 85,992 | |||||
| Provision for loan losses | 1,100 | 623 | 2,470 | 1,842 | |||||
| Net Interest Income after Provision for Loan Losses | 30,355 | 20,316 | 109,630 | 84,150 | |||||
| Non-interest Income | |||||||||
| Service charges on deposit accounts | 1,745 | 1,452 | 6,383 | 5,762 | |||||
| Wire transfer fees | 155 | 218 | 658 | 806 | |||||
| Interchange fees | 1,295 | 1,100 | 5,104 | 4,165 | |||||
| Fiduciary activities | 2,142 | 1,868 | 7,894 | 6,621 | |||||
| Gains (losses) on sale of investment securities (includes $0 and $961 for the | |||||||||
| three months ended December 31, 2017 and 2016, respectively, and $38 and $1,836 for | |||||||||
| the twelve months ended December 31, 2017 and 2016, respectively, related to accumulated other comprehensive earnings reclassifications) | - | 961 | 38 | 1,836 | |||||
| Gain on sale of mortgage loans | 1,988 | 2,504 | 7,906 | 11,675 | |||||
| Mortgage servicing income net of impairment | 408 | 552 | 1,583 | 1,908 | |||||
| Increase in cash value of bank owned life insurance | 451 | 498 | 1,797 | 1,643 | |||||
| Other income | 1,160 | 331 | 1,773 | 1,039 | |||||
| Total non-interest income | 9,344 | 9,484 | 33,136 | 35,455 | |||||
| Non-interest Expense | |||||||||
| Salaries and employee benefits | 14,289 | 11,421 | 51,375 | 44,013 | |||||
| Net occupancy expenses | 2,487 | 2,311 | 9,535 | 8,322 | |||||
| Data processing | 1,603 | 1,512 | 5,914 | 5,367 | |||||
| Professional fees | 693 | 562 | 2,490 | 2,752 | |||||
| Outside services and consultants | 2,027 | 1,880 | 7,018 | 7,863 | |||||
| Loan expense | 1,398 | 1,496 | 4,970 | 5,582 | |||||
| FDIC insurance expense | 270 | 280 | 1,046 | 1,559 | |||||
| Other losses | 182 | 174 | 368 | 684 | |||||
| Other expense | 3,342 | 2,952 | 12,097 | 10,750 | |||||
| Total non-interest expense | 26,291 | 22,588 | 94,813 | 86,892 | |||||
| Income Before Income Tax | 13,408 | 7,212 | 47,953 | 32,713 | |||||
| Income tax expense (includes $0 and $366 for the three months ended December 31, 2017 | |||||||||
| and 2016, respectively, and $13 and $643 for the twelve months ended December 31, 2017 and 2016, respectively, related to income tax expense from | |||||||||
| reclassification items) | 5,758 | 1,609 | 14,836 | 8,801 | |||||
| Net Income | 7,650 | 5,603 | 33,117 | 23,912 | |||||
| Preferred stock dividend | - | - | - | (42 | ) | ||||
| Net Income Available to Common Shareholders | $ | 7,650 | $ | 5,603 | $ | 33,117 | $ | 23,870 | |
| Basic Earnings Per Share | $ | 0.30 | $ | 0.25 | $ | 1.44 | $ | 1.19 | |
| Diluted Earnings Per Share | 0.30 | 0.25 | 1.43 | 1.19 | |||||