HBNC - Horizon Bancorp Inc. Announces Record Earnings for 2018
MICHIGAN CITY, Ind., Jan. 29, 2019 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) — Horizon Bancorp, Inc. (“Horizon” or the “Company”) today announced its unaudited financial results for the three-month and twelve-month periods ended December 31, 2018. All share data has been adjusted to reflect Horizon’s three-for-two stock split effective June 15, 2018.
SUMMARY:
- Net income for the year ended December 31, 2018 was $53.1 million, or $1.38 diluted earnings per share, compared to $33.1 million, or $0.95 diluted earnings per share for year-end 2017. This represents the highest annual net income and diluted earnings per share in the Company’s 145-year history.
- Core net income for the year 2018 increased 38.0% to $48.9 million, or $1.27 diluted earnings per share, compared to $35.5 million, or $1.02 diluted earnings per share, for the year of 2017. (See the “Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share” table on page 4 for the definition of core net income)
- Net income for the fourth quarter of 2018 was $13.1 million, or $0.34 diluted earnings per share, compared to $7.6 million, or $0.20 diluted earnings per share, for the fourth quarter of 2017.
- Core net income for the fourth quarter of 2018 was $12.5 million, or $0.33 diluted earnings per share, compared to $10.1 million, or $0.27 diluted earnings per share, for the fourth quarter of 2017.
- Return on average assets was 1.31% for the year ended December 31, 2018 compared to 0.97% for the year ended December 31, 2017.
- Core return on average assets for the year ended December 31, 2018 was 1.21% compared to 1.04% for the year ended December 31, 2017. (See the “Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” table on page 10 for the definition of core return on average assets)
- Total loans increased by an annualized rate of 7.4%, or $55.0 million, during the three months ended December 31, 2018.
- Total loans increased by a rate of 6.2%, or $176.1 million, during the year ended December 31, 2018. Total loans, excluding loans held for sale and mortgage warehouse loans, increased by a rate of 7.2%, or $198.5 million, during the year ended December 31, 2018.
- Commercial loans increased by an annualized rate of 5.4%, or $23.0 million, during the three months ended December 31, 2018. For the year ended December 31, 2018, commercial loans increased by a rate of 3.1%, or $51.7 million.
- Residential mortgage loans increased by an annualized rate of 10.3%, or $16.9 million, during the three months ended December 31, 2018. For the year ended December 31, 2018, residential mortgage loans increased at a rate of 9.6%, or $58.4 million.
- Consumer loans increased by an annualized rate of 9.9%, or $13.3 million, during the three months ended December 31, 2018. For the year ended December 31, 2018, consumer loans increased at a rate of 19.2%, or $88.5 million.
- Total deposits increased by a rate of 9.0%, or $258.4 million, during 2018.
- Net interest income increased $2.4 million, or 7.6%, to $33.8 million for the three months ended December 31, 2018 compared to $31.5 million for the three months ended December 31, 2017. Net interest income increased $22.5 million, or 20.0%, to $134.6 million for the year ended December 31, 2018 compared to $112.1 million for the year ended December 31, 2017.
- Net interest margin was 3.60% for the three months ended December 31, 2018 compared to 3.71% for the three months ended December 31, 2017. Net interest margin was 3.71% for the year 2018 and 3.75% for the year 2017.
- Horizon’s tangible book value per share increased to $9.43 at December 31, 2018 compared to $9.04 and $8.48 at September 30, 2018 and December 31, 2017, respectively. This represents the highest tangible book value per share in the Company’s 145-year history.
- On October 29, 2018, Horizon announced the pending acquisition of Salin Bancshares, Inc. (“Salin”) and its wholly-owned subsidiary, Salin Bank and Trust Company (“Salin Bank”), headquartered in Indianapolis, Indiana which is anticipated to close during February 2019.
Craig Dwight, Chairman and CEO of Horizon, commented: “I am very pleased to announce Horizon Bancorp’s 2018 results. Our ability to generate organic growth through investments in growth markets, along with increased mass and scale, produced record earnings for 2018. Horizon’s 2018 diluted earnings per share of $1.38 is a 45.3% increase over our 2017 diluted earnings per share of $0.95. Net income increased $20.0 million, or 60.4%, when compared to 2017.”
Dwight added, “At December 31, 2018, Horizon’s total assets surpassed $4.2 billion, driven by loan growth since the beginning of the year. An increase in consumer loans of $88.5 million, mortgage loans of $58.4 million and commercial loans of $51.7 million resulted in a $176.1 million, or 6.3%, increase in total loans. Horizon originated approximately $337.1 million in commercial loans during 2018; however, only 58.0%, or $195.6 million, of these originations were funded at the time of the closing of the loan. The markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo experienced an increase in loan balances of $116.4 million, or 20.8%, during 2018 due to our talented local teams’ commitment to these growth markets.”
Dwight continued, “The acquisitions of Lafayette Community Bancorp and Wolverine Bancorp, Inc. in 2017, along with other operational leverage strategies have resulted in an improved efficiency ratio during 2018. Horizon’s efficiency ratio has decreased from 65.28% during 2017, which included a higher amount of merger expenses, to 60.67% during 2018. The improvement in Horizon’s efficiency ratio is a result of good execution by our entire team of Horizon’s merger and integration plans.”
On October 29, 2018, Horizon entered into an agreement to acquire Salin and its wholly-owned subsidiary, Salin Bank in a cash and stock merger. The acquisition is expected to close in February 2019, subject to regulatory and Salin shareholder approval. Salin Bank is the third largest privately held bank in Indiana, with 20 banking centers in 10 Indiana counties, serving Columbus, Delphi, Edinburgh, Fishers, Flora, Fort Wayne, Galveston, Gas City, Kokomo, Lafayette, Logansport, Marion, West Lafayette and Indianapolis. As of September 30, 2018, Salin had total assets of approximately $918.4 million.
Dwight commented, “We are excited about the pending merger with Salin, as it provides entry into the attractive growth markets of Fort Wayne and Columbus, Indiana while also complementing our current Indiana locations. Salin Bank’s presence in the dynamic markets of Indianapolis and Lafayette, Indiana will add to Horizon’s current footprint. In addition, Salin has a talented team who will add depth and experience to our current sales network. Horizon’s strategic plan calls for continued expansion in the States of Indiana and Michigan with an emphasis on strong core deposit growth, investment in growth markets and to add mass and scale to gain additional efficiencies. Horizon’s pending merger with Salin is in alignment with our strategic plan.”
Income Statement Highlights
Net income for the fourth quarter of 2018 was $13.1 million, or $0.34 diluted earnings per share, compared to $7.6 million, or $0.20 diluted earnings per share, for the fourth quarter of 2017. Core net income for the fourth quarter of 2018 was $12.5 million, or $0.33 diluted earnings per share, compared to $10.1 million, or $0.27 diluted earnings per share, for the fourth quarter of 2017.
The increase in net income and diluted earnings per share from the fourth quarter of 2017 when compared to the same period of 2018 reflects an increase in net interest income of $2.4 million along with decreases in income tax expense of $3.2 million, provision for loan losses of $572,000 and non-interest expense of $174,000. These positive impacts to net income were partially offset by a decrease in non-interest income of $867,000 when comparing the fourth quarter of 2018 to the fourth quarter of 2017.
Net income for the year ended December 31, 2018 was $53.1 million, or $1.38 diluted earnings per share, compared to $33.1 million, or $0.95 diluted earnings per share, for the year ended December 31, 2017. Core net income for the year ended December 31, 2018 was $48.9 million, or $1.27 diluted earnings per share, compared to $35.5 million, or $1.02 diluted earnings per share, for the year ended December 31, 2017. This represents a 24.5% increase in core diluted earnings per share for 2018 compared to 2017.
The increase in net income and diluted earnings per share during 2018 when compared to the same period of 2017 reflects increases in core net interest income of $19.9 million and non-interest income of $1.3 million and a decrease in income tax expense of $4.4 million, partially offset by increases in non-interest expense of $7.7 million and provision for loan losses of $436,000.
| Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share |
| (Dollars in Thousands, Except per Share Data, Unaudited) |
| Three Months Ended |
| Twelve Months Ended |
| December 31 |
| September 30 |
| December 31 |
| December 31 |
| December 31 |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| Non-GAAP Reconciliation of Net Income |
| Net income as reported |
| $ |
| 13,133 |
| $ |
| 13,065 |
| $ |
| 7,650 |
| $ |
| 53,117 |
| $ |
| 33,117 |
| Merger expenses |
| 487 |
| - |
| 1,444 |
| 487 |
| 3,656 |
| Tax effect |
| (102 |
| ) |
| - |
| (418 |
| ) |
| (102 |
| ) |
| (1,003 |
| ) |
| Net income excluding merger expenses |
| 13,518 |
| 13,065 |
| 8,676 |
| 53,502 |
| 35,770 |
| Loss (gain) on sale of investment securities |
| 332 |
| 122 |
| - |
| 443 |
| (38 |
| ) |
| Tax effect |
| (70 |
| ) |
| (25 |
| ) |
| - |
| (93 |
| ) |
| 13 |
| Net income excluding gain on sale of investment securities |
| 13,780 |
| 13,162 |
| 8,676 |
| 53,852 |
| 35,745 |
| Death benefit on bank owned life insurance ("BOLI") |
| - |
| - |
| - |
| (154 |
| ) |
| - |
| Tax effect |
| - |
| - |
| - |
| 32 |
| - |
| Net income excluding death benefit on BOLI |
| 13,780 |
| 13,162 |
| 8,676 |
| 53,730 |
| 35,745 |
| 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 |
| 13,780 |
| 13,162 |
| 8,224 |
| 53,730 |
| 35,293 |
| Tax reform bill impact |
| - |
| - |
| 2,426 |
| - |
| 2,426 |
| Net income excluding tax reform bill impact |
| 13,780 |
| 13,162 |
| 10,650 |
| 53,730 |
| 37,719 |
| Acquisition-related purchase accounting adjustments ("PAUs") |
| (1,629 |
| ) |
| (789 |
| ) |
| (868 |
| ) |
| (6,089 |
| ) |
| (3,484 |
| ) |
| Tax effect |
| 342 |
| 166 |
| 304 |
| 1,279 |
| 1,219 |
| Core Net Income |
| $ |
| 12,493 |
| $ |
| 12,539 |
| $ |
| 10,086 |
| $ |
| 48,920 |
| $ |
| 35,454 |
| Non-GAAP Reconciliation of Diluted Earnings per Share |
| Diluted earnings per share ("EPS") as reported |
| $ |
| 0.34 |
| $ |
| 0.34 |
| $ |
| 0.20 |
| $ |
| 1.38 |
| $ |
| 0.95 |
| Merger expenses |
| 0.01 |
| - |
| 0.04 |
| 0.01 |
| 0.11 |
| Tax effect |
| - |
| - |
| (0.01 |
| ) |
| - |
| (0.03 |
| ) |
| Diluted EPS excluding merger expenses |
| 0.35 |
| 0.34 |
| 0.23 |
| 1.39 |
| 1.03 |
| Loss (gain) on sale of investment securities |
| 0.01 |
| - |
| - |
| 0.01 |
| - |
| Tax effect |
| - |
| - |
| - |
| - |
| - |
| Diluted EPS excluding gain on sale of investment securities |
| 0.36 |
| 0.34 |
| 0.23 |
| 1.40 |
| 1.03 |
| Death benefit on BOLI |
| - |
| - |
| - |
| - |
| - |
| Tax effect |
| - |
| - |
| - |
| - |
| - |
| Diluted EPS excluding death benefit on BOLI |
| 0.36 |
| 0.34 |
| 0.23 |
| 1.40 |
| 1.03 |
| Gain on remeasurement of equity interest in Lafayette |
| - |
| - |
| (0.01 |
| ) |
| - |
| (0.01 |
| ) |
| Tax effect |
| - |
| - |
| - |
| - |
| - |
| Diluted EPS excluding gain on remeasurement of equity interest in Lafayette |
| 0.36 |
| 0.34 |
| 0.22 |
| 1.40 |
| 1.02 |
| Tax reform bill impact |
| - |
| - |
| 0.07 |
| - |
| 0.07 |
| Diluted EPS excluding tax reform bill impact |
| 0.36 |
| 0.34 |
| 0.29 |
| 1.40 |
| 1.09 |
| Acquisition-related PAUs |
| (0.04 |
| ) |
| (0.02 |
| ) |
| (0.02 |
| ) |
| (0.16 |
| ) |
| (0.10 |
| ) |
| Tax effect |
| 0.01 |
| - |
| - |
| 0.03 |
| 0.03 |
| Core Diluted EPS |
| $ |
| 0.33 |
| $ |
| 0.32 |
| $ |
| 0.27 |
| $ |
| 1.27 |
| $ |
| 1.02 |
Horizon’s net interest margin decreased to 3.60% for the fourth quarter of 2018 when compared to 3.67% for the third quarter of 2018 and 3.71% for the fourth quarter of 2017. The decrease in net interest margin from the third quarter of 2018 reflects slower increases on the yields for earning assets along with lower loan fees offset by an increase in the cost of interest-bearing liabilities of 17 basis points. This is a result of the flat to inverted yield curve and the mix of interest earning assets being originated and repriced. The increase in the cost of interest-bearing liabilities was due to an increase in the cost of interest-bearing deposits of 19 basis points and borrowings of 19 basis points.
The decrease in net interest margin from the fourth quarter of 2017 reflects an increase in the cost of interest-bearing liabilities of 54 basis points, offset by an increase in the yield of interest-earning assets of 31 basis points. The increase in the cost of interest-bearing liabilities was due to an increase in the cost of interest-bearing deposits of 56 basis points and borrowings of 60 basis points. The increase in the yield of interest-earning assets was due to an increase in the yield on loans receivable of 32 basis points and taxable investment securities of 45 basis points, offset by a decrease in the yield on non-taxable investment securities of 18 basis points.
Net interest margin, excluding acquisition-related purchase accounting adjustments (“core net interest margin”), was 3.43% for the fourth quarter of 2018 compared to 3.59% for the prior quarter and 3.61% for the fourth quarter of 2017. Interest income from acquisition-related purchase accounting adjustments was $1.6 million, $789,000 and $868,000 for the three months ended December 31, 2018, September 30, 2018 and December 31, 2017, respectively.
| Non-GAAP Reconciliation of Net Interest Margin |
| (Dollars in Thousands, Unaudited) |
| Three Months Ended |
| Nine Months Ended |
| December 31 |
| September 30 |
| December 31 |
| December 31 |
| December 31 |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| Non-GAAP Reconciliation of Net Interest Margin |
| Net interest income as reported |
| $ |
| 33,836 |
| $ |
| 33,772 |
| $ |
| 31,455 |
| $ |
| 134,569 |
| $ |
| 112,100 |
| Average interest-earning assets |
| 3,808,822 |
| 3,717,139 |
| 3,471,169 |
| 3,697,938 |
| 3,074,464 |
| Net interest income as a percentage of average interest-earning assets ("Net Interest Margin") |
| 3.60 |
| % |
| 3.67 |
| % |
| 3.71 |
| % |
| 3.71 |
| % |
| 3.75 |
| % |
| Acquisition-related purchase accounting adjustments ("PAUs") |
| $ |
| (1,629 |
| ) |
| $ |
| (789 |
| ) |
| $ |
| (868 |
| ) |
| $ |
| (6,089 |
| ) |
| $ |
| (3,484 |
| ) |
| Core net interest income |
| $ |
| 32,207 |
| $ |
| 32,983 |
| $ |
| 30,587 |
| $ |
| 128,480 |
| $ |
| 108,616 |
| Core net interest margin |
| 3.43 |
| % |
| 3.59 |
| % |
| 3.61 |
| % |
| 3.54 |
| % |
| 3.64 |
| % |
Horizon’s net interest margin decreased to 3.71% for the year ended December 31, 2018 when compared to 3.75% for the year ended December 31, 2017. The cost of interest-bearing liabilities increased 41 basis points, primarily due to an increase in the cost of interest-bearing deposits of 36 basis points and borrowings of 61 basis points. The yield on interest-earning assets increased 27 basis points, primarily due to an increase in the yields earned on loans receivable of 25 basis points and taxable investment securities of 26 basis points, offset by a decrease in the yield earned on non-taxable securities of 26 basis points.
Core net interest margin for the year ended December 31, 2018 was 3.54% compared to 3.64% for the year ended December 31, 2017. Interest income from acquisition-related purchase accounting adjustments was $6.1 million and $3.5 million for the years ended December 31, 2018 and 2017, respectively.
Lending Activity
Total loans increased $176.1 million from $2.838 billion as of December 31, 2017 to $3.014 billion as of December 31, 2018 as consumer loans increased by $88.5 million, residential mortgage loans increased by $58.4 million and commercial loans increased by $51.7 million, offset by a decrease in mortgage warehouse loans of $20.4 million. Consumer loans increased at a rate of 19.2%, primarily due to our experienced consumer loan team and increased focus on growing this portfolio. During 2018, Horizon originated approximately $337.1 million in commercial loans; however, only $195.6 million, or 58.0%, of the total originated loans were funded at the time of the closing of the loan.
| Loan Growth by Type |
| (Dollars in Thousands, Unaudited) |
| December 31 |
| September 30 |
| Amount |
| Percent |
| 2018 |
| 2018 |
| Change |
| Change |
| Commercial |
| $ |
| 1,721,590 |
| $ |
| 1,698,582 |
| $ |
| 23,008 |
| 1.4 |
| % |
| Residential mortgage |
| 668,141 |
| 651,250 |
| 16,891 |
| 2.6 |
| % |
| Consumer |
| 549,481 |
| 536,132 |
| 13,349 |
| 2.5 |
| % |
| Subtotal |
| 2,939,212 |
| 2,885,964 |
| 53,248 |
| 1.8 |
| % |
| Held for sale loans |
| 1,038 |
| 1,980 |
| (942 |
| ) |
| -47.6 |
| % |
| Mortgage warehouse loans |
| 74,120 |
| 71,422 |
| 2,698 |
| 3.8 |
| % |
| Total loans |
| $ |
| 3,014,370 |
| $ |
| 2,959,366 |
| $ |
| 55,004 |
| 1.9 |
| % |
| Loan Growth by Type |
| (Dollars in Thousands, Unaudited) |
| December 31 |
| December 31 |
| Amount |
| Percent |
| 2018 |
| 2017 |
| Change |
| Change |
| Commercial |
| $ |
| 1,721,590 |
| $ |
| 1,669,934 |
| $ |
| 51,656 |
| 3.1 |
| % |
| Residential mortgage |
| 668,141 |
| 609,739 |
| 58,402 |
| 9.6 |
| % |
| Consumer |
| 549,481 |
| 460,999 |
| 88,482 |
| 19.2 |
| % |
| Subtotal |
| 2,939,212 |
| 2,740,672 |
| 198,540 |
| 7.2 |
| % |
| Held for sale loans |
| 1,038 |
| 3,094 |
| (2,056 |
| ) |
| -66.5 |
| % |
| Mortgage warehouse loans |
| 74,120 |
| 94,508 |
| (20,388 |
| ) |
| -21.6 |
| % |
| Total loans |
| $ |
| 3,014,370 |
| $ |
| 2,838,274 |
| $ |
| 176,096 |
| 6.2 |
| % |
Residential mortgage lending activity for the three months ended December 31, 2018 generated $1.5 million in income from the gain on sale of mortgage loans, a decrease of $384,000 from the third quarter of 2018 and a decrease of $533,000 from the fourth quarter of 2017. Total origination volume for the fourth quarter of 2018, including loans placed into portfolio, totaled $83.9 million, representing a decrease of 16.6% from the third quarter of 2018 and a decrease of 6.8% from the fourth quarter of 2017.
Residential mortgage lending activity for the year ended December 31, 2018 generated $6.6 million in income from the gain on sale of mortgage loans, a decrease of $1.3 million when compared to the year ended December 31, 2017. Total origination volume for the year ended December 31, 2018, including loans placed into portfolio, totaled $365.9 million, an increase of $4.4 million when compared to the year ended December 31, 2017. Purchase money mortgage originations for the year ended December 31, 2018 represented 81.0% of total originations compared to 76.1% for the year ended December 31, 2017.
Revenue derived from Horizon’s residential mortgage lending activities was only 4.9% and 5.9% of Horizon’s total revenue for the fourth quarter of 2018 and the year ended December 31, 2018, respectively.
The provision for loan losses totaled $528,000 for the fourth quarter of 2018 compared to $1.2 million for the third quarter of 2018 and $1.1 million for the fourth quarter of 2017. The decrease in the provision for loan losses from the third quarter of 2018 and the fourth quarter of 2017 when compared to the fourth quarter of 2018 was primarily due to improving credit trends and a continued low level of charge-offs.
The provision for loan losses totaled $2.9 million for the year ended December 31, 2018 compared to $2.5 million for the year ended December 31, 2017. The increase in the provision for loan losses from 2017 to 2018 was due to an increase in specific allocations of approximately $851,000, along with additional general and non-specific allocations for loan growth in new markets, higher than anticipated growth of the indirect loan portfolio and an increase in allocation for other economic factors, offset by improving credit trends and a continued low level of charge-offs.
The ratio of the allowance for loan losses to total loans increased to 0.59% as of December 31, 2018 from 0.58% at December 31, 2017. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 0.72% as of December 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 0.98% as of December 31, 2018 compared to 1.23% as of December 31, 2017.
| Non-GAAP Allowance for Loan and Lease Loss Detail |
| As of December 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 |
| $ |
| 2,482,496 |
| $ |
| 17,760 |
| N/A |
| $ |
| 17,760 |
| $ |
| 2,464,736 |
| 0.72 |
| % |
| 0.00 |
| % |
| 0.72 |
| % |
| Heartland |
| 9,085 |
| - |
| 685 |
| 685 |
| 8,400 |
| 0.00 |
| % |
| 7.54 |
| % |
| 7.54 |
| % |
| Summit |
| 21,691 |
| - |
| 1,186 |
| 1,186 |
| 20,505 |
| 0.00 |
| % |
| 5.47 |
| % |
| 5.47 |
| % |
| Peoples |
| 86,634 |
| - |
| 1,958 |
| 1,958 |
| 84,676 |
| 0.00 |
| % |
| 2.26 |
| % |
| 2.26 |
| % |
| Kosciusko |
| 38,578 |
| - |
| 615 |
| 615 |
| 37,963 |
| 0.00 |
| % |
| 1.59 |
| % |
| 1.59 |
| % |
| LaPorte |
| 88,134 |
| 60 |
| 2,985 |
| 3,045 |
| 85,089 |
| 0.07 |
| % |
| 3.39 |
| % |
| 3.46 |
| % |
| CNB |
| 4,499 |
| - |
| 118 |
| 118 |
| 4,381 |
| 0.00 |
| % |
| 2.62 |
| % |
| 2.62 |
| % |
| Lafayette |
| 89,446 |
| - |
| 1,427 |
| 1,427 |
| 88,019 |
| 0.00 |
| % |
| 1.60 |
| % |
| 1.60 |
| % |
| Wolverine |
| 193,807 |
| - |
| 2,723 |
| 2,723 |
| 191,084 |
| 0.00 |
| % |
| 1.41 |
| % |
| 1.41 |
| % |
| Total |
| $ |
| 3,014,370 |
| $ |
| 17,820 |
| $ |
| 11,697 |
| $ |
| 29,517 |
| $ |
| 2,984,853 |
| 0.59 |
| % |
| 0.39 |
| % |
| 0.98 |
| % |
As of December 31, 2018, non-performing loans totaled $15.2 million, which reflects an 8 basis point decrease in non-performing loans to total loans, or a $1.2 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 $451,000, non-performing real estate loans decreased by $709,000 and non-performing consumer loans decreased by $79,000. Other real estate owned and repossessed assets totaled $2.1 million as of December 31, 2018 which is an increase of $1.2 million from December 31, 2017. The majority of this increase was because several bank owned properties acquired through acquisitions and listed for sale that were re-classified to other real estate owned and recorded at fair value during the second quarter of 2018.
Expense Management
Total non-interest expense was $497,000 higher in the fourth quarter of 2018 when compared to the third quarter of 2018, of which $487,000 was due to acquisition-related expenses. Outside services and consultants and professional fees increased $332,000 and $175,000, respectively, primarily due to acquisition-related expenses incurred during the fourth quarter of 2018. Other expenses increased $194,000 during the fourth quarter of 2018 when compared to the third quarter of 2018 primarily due to recruiting expenses. Loan expense increased $115,000 when compared to the third quarter primarily due to the increased volume in indirect lending and the timing of related origination and amortization costs. These increases were offset by a decrease in salaries and employee benefits of $245,000 when comparing the fourth quarter of 2018 to the third quarter of 2018. A decrease in salaries, commissions and bonus expense was offset by an increase in health insurance expense during the fourth quarter of 2018.
Total non-interest expense was $174,000 lower during the fourth quarter of 2018 compared to the same period of 2017. Outside services and consultants and professional fees decreased $491,000 and $81,000, respectively, primarily due to acquisition-related expenses incurred as a result of the Wolverine Bancorp, Inc. (“Wolverine”) acquisition during the fourth quarter of 2017. Salaries and employee benefits decreased $191,000 when comparing the fourth quarter of 2017 to the fourth quarter of 2018. These decreases were partially offset by increases in loan expense of $439,000, data processing of $151,000 and FDIC insurance expense of $123,000. Loan expense increased due to the increased volume in indirect lending and the timing of related origination and amortization costs. The increase in data processing and FDIC insurance expense reflect overall company growth and the acquisitions of Lafayette and Wolverine.
Total non-interest expense was $7.7 million higher for 2018 when compared to 2017. The increase was primarily due to increases in salaries and employee benefits of $5.2 million, loan expense of $1.4 million, net occupancy expenses of $947,000, data processing of $902,000, other expense of $851,000, FDIC insurance expense of $398,000 and other losses of $297,000. The increase in salaries and employee benefits, net occupancy expense, data processing, other expense and FDIC insurance expense reflect overall company growth and the acquisitions of Lafayette and Wolverine during the third and fourth quarters of 2017. Loan expense increased primarily due to the increased volume in indirect lending and the timing of related origination and amortization costs during 2018. Offsetting these increases was a decrease of $1.7 million and $564,000 in outside services and consultants expense and professional fees, respectively, primarily due to lower acquisition-related expenses in 2018.
Income tax expense totaled $2.5 million for the fourth quarter of 2018, a decrease of $62,000 when compared to the third quarter of 2018 and a decrease of $3.2 million when compared to the fourth quarter of 2017. The decrease in income tax expense from the third quarter of 2018 was primarily due to an increase in tax exempt interest income during the fourth quarter of 2018 when compared to the third quarter of 2018. The decrease when comparing the fourth quarter of 2018 to the same prior year period was primarily due to the impact of the corporate tax rate signed into law at the end of 2017. In addition to a lower corporate tax rate being applied to 2018 income, a revaluation to Horizon’s net deferred tax asset of $2.4 million was recorded to income tax expense during the fourth quarter of 2017. Partially offsetting these decreases to income tax expense was an increase in income before taxes of $2.3 million during the fourth quarter of 2018 when compared to the same prior year period.
Income tax expense totaled $10.4 million for the year ended December 31, 2018, a decrease of $4.4 million when compared to the year ended December 31, 2017. The decrease was primarily due to the impact of the new corporate tax rate which was signed into law at the end of 2017 and the benefits from the exercising of stock options. This decrease was offset by an increase in income before income tax expense of $15.6 million when comparing 2018 to the prior year.
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) |
| December 31 |
| September 30 |
| June 30 |
| March 31 |
| December 31 |
| 2018 |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| Total stockholders' equity |
| $ |
| 491,992 |
| $ |
| 477,594 |
| $ |
| 470,535 |
| $ |
| 460,416 |
| $ |
| 457,078 |
| Less: Intangible assets |
| 130,270 |
| 130,755 |
| 131,239 |
| 131,724 |
| 132,282 |
| Total tangible stockholders' equity |
| $ |
| 361,722 |
| $ |
| 346,839 |
| $ |
| 339,296 |
| $ |
| 328,692 |
| $ |
| 324,796 |
| Common shares outstanding |
| 38,375,407 |
| 38,367,890 |
| 38,362,640 |
| 38,332,853 |
| 38,294,729 |
| Tangible book value per common share |
| $ |
| 9.43 |
| $ |
| 9.04 |
| $ |
| 8.84 |
| $ |
| 8.57 |
| $ |
| 8.48 |
| Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity |
| (Dollars in Thousands, Unaudited) |
| Three Months Ended |
| Twelve Months Ended |
| December 31 |
| September 30 |
| December 31 |
| December 31 |
| December 31 |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| Non-GAAP Reconciliation of Return on Average Assets |
| Average Assets |
| $ |
| 4,179,140 |
| $ |
| 4,105,096 |
| $ |
| 3,841,551 |
| $ |
| 4,062,635 |
| $ |
| 3,396,873 |
| Return on average assets ("ROAA") as reported |
| 1.25 |
| % |
| 1.26 |
| % |
| 0.79 |
| % |
| 1.31 |
| % |
| 0.97 |
| % |
| Merger expenses |
| 0.05 |
| % |
| 0.00 |
| % |
| 0.15 |
| % |
| 0.01 |
| % |
| 0.11 |
| % |
| Tax effect |
| -0.01 |
| % |
| 0.00 |
| % |
| -0.04 |
| % |
| 0.00 |
| % |
| -0.03 |
| % |
| ROAA excluding merger expenses |
| 1.29 |
| % |
| 1.26 |
| % |
| 0.90 |
| % |
| 1.32 |
| % |
| 1.05 |
| % |
| Gain on sale of investment securities |
| 0.03 |
| % |
| 0.01 |
| % |
| 0.00 |
| % |
| 0.01 |
| % |
| 0.00 |
| % |
| Tax effect |
| -0.01 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| ROAA excluding gain on sale of investment securities |
| 1.31 |
| % |
| 1.27 |
| % |
| 0.90 |
| % |
| 1.33 |
| % |
| 1.05 |
| % |
| Death benefit on bank owned life insurance ("BOLI") |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| Tax effect |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| ROAA excluding death benefit on BOLI |
| 1.31 |
| % |
| 1.27 |
| % |
| 0.90 |
| % |
| 1.33 |
| % |
| 1.05 |
| % |
| Gain on remeasurement of equity interest in Lafayette |
| 0.00 |
| % |
| 0.00 |
| % |
| -0.05 |
| % |
| 0.00 |
| % |
| -0.02 |
| % |
| Tax effect |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.01 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| ROAA excluding gain on remeasurement of equity interest in Lafayette |
| 1.31 |
| % |
| 1.27 |
| % |
| 0.86 |
| % |
| 1.33 |
| % |
| 1.03 |
| % |
| Tax reform bill impact |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.25 |
| % |
| 0.00 |
| % |
| 0.07 |
| % |
| ROAA excluding tax reform bill impact |
| 1.31 |
| % |
| 1.27 |
| % |
| 1.11 |
| % |
| 1.33 |
| % |
| 1.10 |
| % |
| Acquisition-related purchase accounting adjustments ("PAUs") |
| -0.15 |
| % |
| -0.08 |
| % |
| -0.09 |
| % |
| -0.15 |
| % |
| -0.10 |
| % |
| Tax effect |
| 0.03 |
| % |
| 0.02 |
| % |
| 0.03 |
| % |
| 0.03 |
| % |
| 0.04 |
| % |
| Core ROAA |
| 1.19 |
| % |
| 1.21 |
| % |
| 1.05 |
| % |
| 1.21 |
| % |
| 1.04 |
| % |
| Non-GAAP Reconciliation of Return on Average Common Equity |
| Average Common Equity |
| $ |
| 485,662 |
| $ |
| 476,959 |
| $ |
| 449,318 |
| $ |
| 473,420 |
| $ |
| 378,709 |
| Return on average common equity ("ROACE") as reported |
| 10.73 |
| % |
| 10.87 |
| % |
| 6.75 |
| % |
| 11.22 |
| % |
| 8.74 |
| % |
| Merger expenses |
| 0.40 |
| % |
| 0.00 |
| % |
| 1.28 |
| % |
| 0.10 |
| % |
| 0.97 |
| % |
| Tax effect |
| -0.08 |
| % |
| 0.00 |
| % |
| -0.37 |
| % |
| -0.02 |
| % |
| -0.26 |
| % |
| ROACE excluding merger expenses |
| 11.05 |
| % |
| 10.87 |
| % |
| 7.66 |
| % |
| 11.30 |
| % |
| 9.45 |
| % |
| Gain on sale of investment securities |
| 0.27 |
| % |
| 0.10 |
| % |
| 0.00 |
| % |
| 0.09 |
| % |
| -0.01 |
| % |
| Tax effect |
| -0.06 |
| % |
| -0.02 |
| % |
| 0.00 |
| % |
| -0.02 |
| % |
| 0.00 |
| % |
| ROACE excluding gain on sale of investment securities |
| 11.26 |
| % |
| 10.95 |
| % |
| 7.66 |
| % |
| 11.37 |
| % |
| 9.44 |
| % |
| Death benefit on bank owned life insurance ("BOLI") |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| -0.03 |
| % |
| 0.00 |
| % |
| Tax effect |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.01 |
| % |
| 0.00 |
| % |
| ROACE excluding death benefit on BOLI |
| 11.26 |
| % |
| 10.95 |
| % |
| 7.66 |
| % |
| 11.35 |
| % |
| 9.44 |
| % |
| Gain on remeasurement of equity interest in Lafayette |
| 0.00 |
| % |
| 0.00 |
| % |
| -0.47 |
| % |
| 0.00 |
| % |
| -0.14 |
| % |
| Tax effect |
| 0.00 |
| % |
| 0.00 |
| % |
| 0.07 |
| % |
| 0.00 |
| % |
| 0.02 |
| % |
| ROACE excluding gain on remeasurement of equity interest in Lafayette |
| 11.26 |
| % |
| 10.95 |
| % |
| 7.26 |
| % |
| 11.35 |
| % |
| 9.32 |
| % |
| Tax reform bill impact |
| 0.00 |
| % |
| 0.00 |
| % |
| 2.14 |
| % |
| 0.00 |
| % |
| 0.64 |
| % |
| ROACE excluding tax reform bill impact |
| 11.26 |
| % |
| 10.95 |
| % |
| 9.40 |
| % |
| 11.35 |
| % |
| 9.96 |
| % |
| Acquisition-related purchase accounting adjustments ("PAUs") |
| -1.33 |
| % |
| -0.66 |
| % |
| -0.77 |
| % |
| -1.29 |
| % |
| -0.92 |
| % |
| Tax effect |
| 0.28 |
| % |
| 0.14 |
| % |
| 0.27 |
| % |
| 0.27 |
| % |
| 0.32 |
| % |
| Core ROACE |
| 10.21 |
| % |
| 10.43 |
| % |
| 8.90 |
| % |
| 10.33 |
| % |
| 9.36 |
| % |
About Horizon
Horizon Bancorp, Inc. 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 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, Inc.
Mark E. Secor
Chief Financial Officer
(219) 873-2611
Fax: (219) 874-9280
HORIZON BANCORP, INC.
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
| December 31 |
| September 30 |
| June 30 |
| March 31 |
| December 31 |
| 2018 |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| Balance sheet: |
| Total assets |
| $ |
| 4,246,688 |
| $ |
| 4,150,561 |
| $ |
| 4,076,611 |
| $ |
| 3,969,750 |
| $ |
| 3,964,303 |
| Investment securities |
| 810,460 |
| 766,153 |
| 735,962 |
| 714,425 |
| 710,113 |
| Commercial loans |
| 1,721,590 |
| 1,698,582 |
| 1,672,998 |
| 1,656,374 |
| 1,669,934 |
| Mortgage warehouse loans |
| 74,120 |
| 71,422 |
| 109,016 |
| 101,299 |
| 94,508 |
| Residential mortgage loans |
| 668,141 |
| 651,250 |
| 634,636 |
| 618,131 |
| 609,739 |
| Consumer loans |
| 549,481 |
| 536,132 |
| 507,866 |
| 480,989 |
| 460,999 |
| Earnings assets |
| 3,842,903 |
| 3,743,592 |
| 3,681,583 |
| 3,591,296 |
| 3,566,492 |
| Non-interest bearing deposit accounts |
| 642,129 |
| 621,475 |
| 615,018 |
| 602,175 |
| 601,805 |
| Interest bearing transaction accounts |
| 1,684,336 |
| 1,605,825 |
| 1,644,758 |
| 1,619,859 |
| 1,712,246 |
| Time deposits |
| 812,911 |
| 901,254 |
| 756,387 |
| 711,642 |
| 566,952 |
| Borrowings |
| 550,384 |
| 477,719 |
| 524,846 |
| 520,300 |
| 564,157 |
| Subordinated debentures |
| 37,837 |
| 37,791 |
| 37,745 |
| 37,699 |
| 37,653 |
| Total stockholders' equity |
| 491,992 |
| 477,594 |
| 470,535 |
| 460,416 |
| 457,078 |
| Income statement: |
| Three months ended |
| Net interest income |
| $ |
| 33,836 |
| $ |
| 33,772 |
| $ |
| 33,550 |
| $ |
| 33,411 |
| $ |
| 31,455 |
| Provision for loan losses |
| 528 |
| 1,176 |
| 635 |
| 567 |
| 1,100 |
| Non-interest income |
| 8,477 |
| 8,686 |
| 8,932 |
| 8,318 |
| 9,344 |
| Non-interest expenses |
| 26,117 |
| 25,620 |
| 24,942 |
| 25,837 |
| 26,291 |
| Income tax expense |
| 2,535 |
| 2,597 |
| 2,790 |
| 2,521 |
| 5,758 |
| Net income |
| $ |
| 13,133 |
| $ |
| 13,065 |
| $ |
| 14,115 |
| $ |
| 12,804 |
| $ |
| 7,650 |
| Per share data:(1) |
| Basic earnings per share |
| $ |
| 0.34 |
| $ |
| 0.34 |
| $ |
| 0.37 |
| $ |
| 0.33 |
| $ |
| 0.20 |
| Diluted earnings per share |
| 0.34 |
| 0.34 |
| 0.37 |
| 0.33 |
| 0.20 |
| Cash dividends declared per common share |
| 0.10 |
| 0.10 |
| 0.10 |
| 0.10 |
| 0.09 |
| Book value per common share |
| 12.82 |
| 12.45 |
| 12.27 |
| 12.01 |
| 11.93 |
| Tangible book value per common share |
| 9.43 |
| 9.04 |
| 8.84 |
| 8.57 |
| 8.48 |
| Market value - high |
| 19.40 |
| 21.39 |
| 21.94 |
| 20.59 |
| 19.47 |
| Market value - low |
| $ |
| 14.94 |
| $ |
| 19.44 |
| $ |
| 19.17 |
| $ |
| 17.87 |
| $ |
| 17.33 |
| Weighted average shares outstanding - Basic |
| 38,367,972 |
| 38,365,379 |
| 38,347,612 |
| 38,306,395 |
| 37,711,200 |
| Weighted average shares outstanding - Diluted |
| 38,488,861 |
| 38,534,970 |
| 38,519,401 |
| 38,468,811 |
| 37,897,012 |
| Key ratios: |
| Return on average assets |
| 1.25 |
| % |
| 1.26 |
| % |
| 1.41 |
| % |
| 1.32 |
| % |
| 0.79 |
| % |
| Return on average common stockholders' equity |
| 10.73 |
| 10.87 |
| 12.15 |
| 11.29 |
| 6.75 |
| Net interest margin |
| 3.60 |
| 3.67 |
| 3.78 |
| 3.81 |
| 3.71 |
| Loan loss reserve to total loans |
| 0.59 |
| 0.60 |
| 0.58 |
| 0.58 |
| 0.58 |
| Average equity to average assets |
| 11.62 |
| 11.62 |
| 11.60 |
| 11.67 |
| 11.70 |
| Bank only capital ratios: |
| Tier 1 capital to average assets |
| 9.38 |
| 9.53 |
| 9.65 |
| 9.66 |
| 9.89 |
| Tier 1 capital to risk weighted assets |
| 11.91 |
| 12.09 |
| 12.21 |
| 12.32 |
| 12.29 |
| Total capital to risk weighted assets |
| 12.47 |
| 12.66 |
| 12.77 |
| 12.87 |
| 12.85 |
| Loan data: |
| Substandard loans |
| $ |
| 38,775 |
| $ |
| 34,655 |
| $ |
| 40,941 |
| $ |
| 43,035 |
| $ |
| 46,162 |
| 30 to 89 days delinquent |
| 7,161 |
| 6,878 |
| 3,978 |
| 8,932 |
| 9,329 |
| 90 days and greater delinquent - accruing interest |
| $ |
| 568 |
| $ |
| 202 |
| $ |
| 49 |
| $ |
| 30 |
| $ |
| 167 |
| Trouble debt restructures - accruing interest |
| 2,002 |
| 1,830 |
| 1,911 |
| 1,899 |
| 1,958 |
| Trouble debt restructures - non-accrual |
| 1,057 |
| 1,077 |
| 894 |
| 1,090 |
| 1,013 |
| Non-accural loans |
| 11,548 |
| 11,417 |
| 12,555 |
| 12,062 |
| 13,276 |
| Total non-performing loans |
| $ |
| 15,175 |
| $ |
| 14,526 |
| $ |
| 15,409 |
| $ |
| 15,081 |
| $ |
| 16,414 |
| Non-performing loans to total loans |
| 0.50 |
| % |
| 0.49 |
| % |
| 0.53 |
| % |
| 0.53 |
| % |
| 0.58 |
| % |
| (1)Adjusted for 3:2 stock split on June 15, 2018 |
HORIZON BANCORP, INC.
Financial Highlights
(Dollars in thousands except share and per share data and ratios, Unaudited)
| December 31 |
| December 31 |
| 2018 |
| 2017 |
| Balance sheet: |
| Total assets |
| $ |
| 4,246,688 |
| $ |
| 3,964,303 |
| Investment securities |
| 810,460 |
| 710,113 |
| Commercial loans |
| 1,721,590 |
| 1,669,934 |
| Mortgage warehouse loans |
| 74,120 |
| 94,508 |
| Residential mortgage loans |
| 668,141 |
| 609,739 |
| Consumer loans |
| 549,481 |
| 460,999 |
| Earnings assets |
| 3,842,903 |
| 3,566,492 |
| Non-interest bearing deposit accounts |
| 642,129 |
| 601,805 |
| Interest bearing transaction accounts |
| 1,684,336 |
| 1,712,246 |
| Time deposits |
| 812,911 |
| 566,952 |
| Borrowings |
| 550,384 |
| 564,157 |
| Subordinated debentures |
| 37,837 |
| 37,653 |
| Total stockholders' equity |
| 491,992 |
| 457,078 |
| Twelve Months Ended |
| Income statement: |
| Net interest income |
| $ |
| 134,569 |
| $ |
| 112,100 |
| Provision for loan losses |
| 2,906 |
| 2,470 |
| Non-interest income |
| 34,413 |
| 33,136 |
| Non-interest expenses |
| 102,516 |
| 94,813 |
| Income tax expense |
| 10,443 |
| 14,836 |
| Net income |
| $ |
| 53,117 |
| $ |
| 33,117 |
| Per share data:(1) |
| Basic earnings per share |
| $ |
| 1.39 |
| $ |
| 0.96 |
| Diluted earnings per share |
| 1.38 |
| 0.95 |
| Cash dividends declared per common share |
| 0.40 |
| 0.33 |
| Book value per common share |
| 12.82 |
| 11.93 |
| Tangible book value per common share |
| 9.43 |
| 8.48 |
| Market value - high |
| 21.94 |
| 19.47 |
| Market value - low |
| $ |
| 14.94 |
| $ |
| 16.49 |
| Weighted average shares outstanding - Basic |
| 38,347,059 |
| 34,553,736 |
| Weighted average shares outstanding - Diluted |
| 38,495,980 |
| 34,774,930 |
| Key ratios: |
| Return on average assets |
| 1.31 |
| % |
| 0.97 |
| % |
| Return on average common stockholders' equity |
| 11.22 |
| 8.74 |
| Net interest margin |
| 3.71 |
| 3.75 |
| Loan loss reserve to total loans |
| 0.59 |
| 0.58 |
| Average equity to average assets |
| 11.65 |
| 11.15 |
| Bank only capital ratios: |
| Tier 1 capital to average assets |
| 9.38 |
| 9.89 |
| Tier 1 capital to risk weighted assets |
| 11.91 |
| 12.29 |
| Total capital to risk weighted assets |
| 12.47 |
| 12.85 |
| Loan data: |
| Substandard loans |
| $ |
| 38,775 |
| $ |
| 46,162 |
| 30 to 89 days delinquent |
| 7,161 |
| 9,329 |
| 90 days and greater delinquent - accruing interest |
| $ |
| 568 |
| $ |
| 167 |
| Trouble debt restructures - accruing interest |
| 2,002 |
| 1,958 |
| Trouble debt restructures - non-accrual |
| 1,057 |
| 1,013 |
| Non-accural loans |
| 11,548 |
| 13,276 |
| Total non-performing loans |
| $ |
| 15,175 |
| $ |
| 16,414 |
| Non-performing loans to total loans |
| 0.50 |
| % |
| 0.58 |
| % |
| (1)Adjusted for 3:2 stock split on June 15, 2018 |
HORIZON BANCORP, INC.
| Allocation of the Allowance for Loan and Lease Losses |
| (Dollars in Thousands, Unaudited) |
| December 31 |
| September 30 |
| June 30 |
| March 31 |
| December 31 |
| 2018 |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| Commercial |
| $ |
| 10,495 |
| $ |
| 10,581 |
| $ |
| 8,865 |
| $ |
| 7,840 |
| $ |
| 9,093 |
| Real estate |
| 1,676 |
| 1,574 |
| 1,761 |
| 1,930 |
| 2,188 |
| Mortgage warehousing |
| 1,006 |
| 1,030 |
| 1,084 |
| 1,030 |
| 1,030 |
| Consumer |
| 4,643 |
| 4,613 |
| 5,361 |
| 5,674 |
| 4,083 |
| Total |
| $ |
| 17,820 |
| $ |
| 17,798 |
| $ |
| 17,071 |
| $ |
| 16,474 |
| $ |
| 16,394 |
| Net Charge-Offs (Recoveries) |
| (Dollars in Thousands, Unaudited) |
| Three Months Ended |
| December 31 |
| September 30 |
| June 30 |
| March 31 |
| December 31 |
| 2018 |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| Commercial |
| $ |
| 196 |
| $ |
| 179 |
| $ |
| (40 |
| ) |
| $ |
| (38 |
| ) |
| $ |
| 84 |
| Real estate |
| 47 |
| (2 |
| ) |
| (2 |
| ) |
| 6 |
| (9 |
| ) |
| Mortgage warehousing |
| - |
| - |
| - |
| - |
| - |
| Consumer |
| 263 |
| 272 |
| 80 |
| 519 |
| 217 |
| Total |
| $ |
| 506 |
| $ |
| 449 |
| $ |
| 38 |
| $ |
| 487 |
| $ |
| 292 |
| Percent of net charge-offs to average loans outstanding for the period |
| 0.02 |
| % |
| 0.02 |
| % |
| 0.00 |
| % |
| 0.01 |
| % |
| 0.01 |
| % |
| Total Non-performing Loans |
| (Dollars in Thousands, Unaudited) |
| December 31 |
| September 30 |
| June 30 |
| March 31 |
| December 31 |
| 2018 |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| Commercial |
| $ |
| 6,903 |
| $ |
| 8,355 |
| $ |
| 8,987 |
| $ |
| 6,778 |
| $ |
| 7,354 |
| Real estate |
| 5,007 |
| 3,754 |
| 3,915 |
| 5,276 |
| 5,716 |
| Mortgage warehousing |
| - |
| - |
| - |
| - |
| - |
| Consumer |
| 3,265 |
| 2,417 |
| 2,507 |
| 3,027 |
| 3,344 |
| Total |
| $ |
| 15,175 |
| $ |
| 14,526 |
| $ |
| 15,409 |
| $ |
| 15,081 |
| $ |
| 16,414 |
| Non-performing loans to total loans |
| 0.50 |
| % |
| 0.49 |
| % |
| 0.53 |
| % |
| 0.53 |
| % |
| 0.58 |
| % |
| Other Real Estate Owned and Repossessed Assets |
| (Dollars in Thousands, Unaudited) |
| December 31 |
| September 30 |
| June 30 |
| March 31 |
| December 31 |
| 2018 |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| Commercial |
| $ |
| 1,967 |
| $ |
| 2,181 |
| $ |
| 2,628 |
| $ |
| 547 |
| $ |
| 578 |
| Real estate |
| 60 |
| 58 |
| 302 |
| 281 |
| 200 |
| Mortgage warehousing |
| - |
| - |
| - |
| - |
| - |
| Consumer |
| 48 |
| 26 |
| 62 |
| 42 |
| 60 |
| Total |
| $ |
| 2,075 |
| $ |
| 2,265 |
| $ |
| 2,992 |
| $ |
| 870 |
| $ |
| 838 |
HORIZON BANCORP, INC.
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
| Three Months Ended |
| Three Months Ended |
| December 31, 2018 |
| December 31, 2017 |
| Average Balance |
| Interest |
| Average Rate |
| Average Balance |
| Interest |
| Average Rate |
| Assets |
| Interest-earning assets |
| Federal funds sold |
| $ |
| 10,093 |
| $ |
| 62 |
| 2.44 |
| % |
| $ |
| 10,175 |
| $ |
| 24 |
| 0.94 |
| % |
| Interest-earning deposits |
| 21,763 |
| 93 |
| 1.70 |
| % |
| 22,939 |
| 49 |
| 0.85 |
| % |
| Investment securities - taxable |
| 432,620 |
| 2,734 |
| 2.51 |
| % |
| 422,864 |
| 2,196 |
| 2.06 |
| % |
| Investment securities - non-taxable(1) |
| 364,236 |
| 2,324 |
| 3.20 |
| % |
| 309,902 |
| 1,875 |
| 3.38 |
| % |
| Loans receivable(2)(3) |
| 2,980,110 |
| 38,517 |
| 5.14 |
| % |
| 2,705,289 |
| 32,630 |
| 4.82 |
| % |
| Total interest-earning assets(1) |
| 3,808,822 |
| 43,730 |
| 4.63 |
| % |
| 3,471,169 |
| 36,774 |
| 4.32 |
| % |
| Non-interest-earning assets |
| Cash and due from banks |
| 44,732 |
| 44,765 |
| Allowance for loan losses |
| (17,792 |
| ) |
| (15,692 |
| ) |
| Other assets |
| 343,378 |
| 341,309 |
| Total average assets |
| $ |
| 4,179,140 |
| $ |
| 3,841,551 |
| Liabilities and Stockholders' Equity |
| Interest-bearing liabilities |
| Interest-bearing deposits |
| $ |
| 2,526,209 |
| $ |
| 6,411 |
| 1.01 |
| % |
| $ |
| 2,278,651 |
| $ |
| 2,586 |
| 0.45 |
| % |
| Borrowings |
| 458,485 |
| 2,882 |
| 2.49 |
| % |
| 451,866 |
| 2,150 |
| 1.89 |
| % |
| Subordinated debentures |
| 36,616 |
| 601 |
| 6.51 |
| % |
| 36,431 |
| 583 |
| 6.35 |
| % |
| Total interest-bearing liabilities |
| 3,021,310 |
| 9,894 |
| 1.30 |
| % |
| 2,766,948 |
| 5,319 |
| 0.76 |
| % |
| Non-interest-bearing liabilities |
| Demand deposits |
| 656,114 |
| 603,733 |
| Accrued interest payable and other liabilities |
| 16,054 |
| 21,552 |
| Stockholders' equity |
| 485,662 |
| 449,318 |
| Total average liabilities and stockholders' equity |
| $ |
| 4,179,140 |
| $ |
| 3,841,551 |
| Net interest income/spread |
| $ |
| 33,836 |
| 3.33 |
| % |
| $ |
| 31,455 |
| 3.55 |
| % |
| Net interest income as a percentage of average interest-earning assets(1) |
| 3.60 |
| % |
| 3.71 |
| % |
| (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, INC.
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
| Twelve Months Ended |
| Twelve Months Ended |
| December 31, 2018 |
| December 31, 2017 |
| Average Balance |
| Interest |
| Average Rate |
| Average Balance |
| Interest |
| Average Rate |
| Assets |
| Interest-earning assets |
| Federal funds sold |
| $ |
| 4,696 |
| $ |
| 115 |
| 2.45 |
| % |
| $ |
| 5,450 |
| $ |
| 80 |
| 1.47 |
| % |
| Interest-earning deposits |
| 24,491 |
| 393 |
| 1.60 |
| % |
| 23,865 |
| 301 |
| 1.26 |
| % |
| Investment securities - taxable |
| 431,970 |
| 10,113 |
| 2.34 |
| % |
| 417,993 |
| 8,705 |
| 2.08 |
| % |
| Investment securities - non-taxable(1) |
| 326,040 |
| 8,069 |
| 3.13 |
| % |
| 292,030 |
| 7,068 |
| 3.39 |
| % |
| Loans receivable(2)(3) |
| 2,910,741 |
| 147,478 |
| 5.08 |
| % |
| 2,335,126 |
| 112,329 |
| 4.83 |
| % |
| Total interest-earning assets(1) |
| 3,697,938 |
| 166,168 |
| 4.56 |
| % |
| 3,074,464 |
| 128,483 |
| 4.29 |
| % |
| Non-interest-earning assets |
| Cash and due from banks |
| 44,645 |
| 42,578 |
| Allowance for loan losses |
| (16,964 |
| ) |
| (15,226 |
| ) |
| Other assets |
| 337,016 |
| 295,057 |
| Total average assets |
| $ |
| 4,062,635 |
| $ |
| 3,396,873 |
| Liabilities and Stockholders' Equity |
| Interest-bearing liabilities |
| Interest-bearing deposits |
| $ |
| 2,418,987 |
| $ |
| 18,225 |
| 0.75 |
| % |
| $ |
| 2,045,896 |
| $ |
| 7,901 |
| 0.39 |
| % |
| Borrowings |
| 492,830 |
| 11,009 |
| 2.23 |
| % |
| 381,488 |
| 6,178 |
| 1.62 |
| % |
| Subordinated debentures |
| 36,547 |
| 2,365 |
| 6.47 |
| % |
| 36,362 |
| 2,304 |
| 6.34 |
| % |
| Total interest-bearing liabilities |
| 2,948,364 |
| 31,599 |
| 1.07 |
| % |
| 2,463,746 |
| 16,383 |
| 0.66 |
| % |
| Non-interest-bearing liabilities |
| Demand deposits |
| 624,576 |
| 533,852 |
| Accrued interest payable and other liabilities |
| 16,275 |
| 20,566 |
| Stockholders' equity |
| 473,420 |
| 378,709 |
| Total average liabilities and stockholders' equity |
| $ |
| 4,062,635 |
| $ |
| 3,396,873 |
| Net interest income/spread |
| $ |
| 134,569 |
| 3.49 |
| % |
| $ |
| 112,100 |
| 3.63 |
| % |
| Net interest income as a percentage of average interest-earning assets(1) |
| 3.71 |
| % |
| 3.75 |
| % |
| (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, INC.
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands)
| December 31 |
| December 31 |
| 2018 |
| 2017 |
| (Unaudited) |
| Assets |
| Assets |
| $ |
| 74,236 |
| $ |
| 76,441 |
| Cash and due from banks |
| 600,348 |
| 509,665 |
| Investment securities, available for sale |
| 210,112 |
| 200,448 |
| Investment securities, held to maturity (fair value of $208,274 and $201,085) |
| 1,038 |
| 3,094 |
| Loans held for sale |
| 2,995,512 |
| 2,818,786 |
| Loans, net of allowance for loan losses of $17,820 and $16,394 |
| 74,331 |
| 75,529 |
| Premises and equipment, net |
| 18,073 |
| 18,105 |
| Federal Home Loan Bank stock |
| 119,880 |
| 119,880 |
| Goodwill |
| 10,390 |
| 12,402 |
| Other intangible assets |
| 14,239 |
| 13,059 |
| Interest receivable |
| 88,062 |
| 75,931 |
| Cash value of life insurance |
| 40,467 |
| 40,963 |
| Other assets |
| $ |
| 4,246,688 |
| $ |
| 3,964,303 |
| Liabilities |
| Deposits |
| Non-interest bearing |
| $ |
| 642,129 |
| $ |
| 601,805 |
| Interest bearing |
| 2,497,247 |
| 2,279,198 |
| Total deposits |
| 3,139,376 |
| 2,881,003 |
| Borrowings |
| 550,384 |
| 564,157 |
| Subordinated debentures |
| 37,837 |
| 37,653 |
| Interest payable |
| 2,031 |
| 886 |
| Other liabilities |
| 25,068 |
| 23,526 |
| Total liabilities |
| 3,754,696 |
| 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 99,000,000 shares (1) |
| Issued 38,400,476 and 38,323,604 shares (1), Outstanding 38,375,407 and 38,294,729 shares (1) |
| - |
| - |
| Additional paid-in capital |
| 276,101 |
| 275,059 |
| Retained earnings |
| 224,035 |
| 185,570 |
| Accumulated other comprehensive loss |
| (8,144 |
| ) |
| (3,551 |
| ) |
| Total stockholders' equity |
| 491,992 |
| 457,078 |
| Total liabilities and stockholders' equity |
| $ |
| 4,246,688 |
| $ |
| 3,964,303 |
| (1) Adjusted for 3:2 stock split on June 15, 2018 |
HORIZON BANCORP, INC.
Condensed Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Per Share Data, Unaudited)
| Three Months Ended |
| Twelve Months Ended |
| December 31 |
| December 31 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| Interest Income |
| Loans receivable |
| $ |
| 38,517 |
| $ |
| 32,630 |
| $ |
| 147,478 |
| $ |
| 112,329 |
| Investment securities |
| Taxable |
| 2,889 |
| 2,269 |
| 10,621 |
| 9,086 |
| Tax exempt |
| 2,324 |
| 1,875 |
| 8,069 |
| 7,068 |
| Total interest income |
| 43,730 |
| 36,774 |
| 166,168 |
| 128,483 |
| Interest Expense |
| Deposits |
| 6,411 |
| 2,586 |
| 18,225 |
| 7,901 |
| Borrowed funds |
| 2,882 |
| 2,150 |
| 11,009 |
| 6,178 |
| Subordinated debentures |
| 601 |
| 583 |
| 2,365 |
| 2,304 |
| Total interest expense |
| 9,894 |
| 5,319 |
| 31,599 |
| 16,383 |
| Net Interest Income |
| 33,836 |
| 31,455 |
| 134,569 |
| 112,100 |
| Provision for loan losses |
| 528 |
| 1,100 |
| 2,906 |
| 2,470 |
| Net Interest Income after Provision for Loan Losses |
| 33,308 |
| 30,355 |
| 131,663 |
| 109,630 |
| Non-interest Income |
| Service charges on deposit accounts |
| 1,958 |
| 1,745 |
| 7,762 |
| 6,383 |
| Wire transfer fees |
| 122 |
| 155 |
| 612 |
| 658 |
| Interchange fees |
| 1,422 |
| 1,295 |
| 5,715 |
| 5,104 |
| Fiduciary activities |
| 2,229 |
| 2,142 |
| 7,827 |
| 7,894 |
| Gains on sale of investment securities (includes $(332) and $0 for the |
| three months ended December 31, 2018 and 2017, respectively, and $(443) and $38 for the twelve months ended December 31, 2018 and 2017, respectively, related to accumulated other comprehensive earnings reclassifications) |
| (332 |
| ) |
| - |
| (443 |
| ) |
| 38 |
| Gain on sale of mortgage loans |
| 1,455 |
| 1,988 |
| 6,613 |
| 7,906 |
| Mortgage servicing income net of impairment |
| 697 |
| 408 |
| 2,120 |
| 1,583 |
| Increase in cash value of bank owned life insurance |
| 532 |
| 451 |
| 1,912 |
| 1,797 |
| Death benefit on bank owned life insurance |
| - |
| - |
| 154 |
| - |
| Other income |
| 394 |
| 1,160 |
| 2,141 |
| 1,773 |
| Total non-interest income |
| 8,477 |
| 9,344 |
| 34,413 |
| 33,136 |
| Non-interest Expense |
| Salaries and employee benefits |
| 14,098 |
| 14,289 |
| 56,623 |
| 51,375 |
| Net occupancy expenses |
| 2,501 |
| 2,487 |
| 10,482 |
| 9,535 |
| Data processing |
| 1,754 |
| 1,603 |
| 6,816 |
| 5,914 |
| Professional fees |
| 612 |
| 693 |
| 1,926 |
| 2,490 |
| Outside services and consultants |
| 1,536 |
| 2,027 |
| 5,271 |
| 7,018 |
| Loan expense |
| 1,837 |
| 1,398 |
| 6,341 |
| 4,970 |
| FDIC insurance expense |
| 393 |
| 270 |
| 1,444 |
| 1,046 |
| Other losses |
| 89 |
| 182 |
| 665 |
| 368 |
| Other expense |
| 3,297 |
| 3,342 |
| 12,948 |
| 12,097 |
| Total non-interest expense |
| 26,117 |
| 26,291 |
| 102,516 |
| 94,813 |
| Income Before Income Tax |
| 15,668 |
| 13,408 |
| 63,560 |
| 47,953 |
| Income tax expense (includes $(70) and $0 for the three months ended |
| December 31, 2018 and 2017, respectively, and $(93) and $13 for the twelve months ended December 31, 2018 and 2017, respectively, related to income tax expense from reclassification items) |
| 2,535 |
| 5,758 |
| 10,443 |
| 14,836 |
| Net Income |
| $ |
| 13,133 |
| $ |
| 7,650 |
| $ |
| 53,117 |
| $ |
| 33,117 |
| Basic Earnings Per Share (1) |
| $ |
| 0.34 |
| $ |
| 0.20 |
| $ |
| 1.39 |
| $ |
| 0.96 |
| Diluted Earnings Per Share (1) |
| 0.34 |
| 0.20 |
| 1.38 |
| 0.95 |
| (1) Adjusted for 3:2 stock split on June 15, 2018 |