MICHIGAN CITY, Ind., Oct. 23, 2019 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) – Horizon Bancorp, Inc. (“Horizon” or the “Company”) today announced its unaudited financial results for the three-month and nine-month periods ended September 30, 2019. All share data has been adjusted to reflect Horizon’s three-for-two stock split effective June 15, 2018.
SUMMARY:
- Net income for the quarter ended September 30, 2019 was $20.5 million, or $0.46 diluted earnings per share, compared to $13.1 million, or $0.34 diluted earnings per share, for the quarter ended September 30, 2018. This represents the highest quarterly net income and diluted earnings per share in the Company’s history.
- Core net income for the quarter ended September 30, 2019 increased 54.4% to $20.3 million, or $0.45 diluted earnings per share, compared to $13.2 million, or $0.34 diluted earnings per share, for the same period in 2018. This represents the highest quarterly core net income and core diluted earnings per share in the Company’s history. (See the “Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share” table on page 4 for a description of the elements of core net income.)
- Net income for the first nine months of 2019 was $48.0 million, or $1.11 diluted earnings per share, compared to $40.0 million, or $1.04 diluted earnings per share, for the first nine months of 2018. This represents the highest year-to-date net income and diluted earnings per share as of September 30th in the Company’s history.
- Core net income for the first nine months of 2019 was $52.1 million, or $1.21 diluted earnings per share, compared to $39.9 million, or $1.04 diluted earnings per share, for the first nine months of 2018. This represents the highest year-to-date core net income and core diluted earnings per share as of September 30th in the Company’s history. (See the “Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share” table on page 4 for a description of the elements of core net income.)
- Net interest margin for the quarter ended September 30, 2019 was 3.82% compared to 3.73% and 3.67% for the quarters ended June 30, 2019 and September 30, 2018, respectively. The increase in net interest margin from the second quarter of 2019 and third quarter of 2018 reflects an increase in the yield of interest-earning assets as loans continue to reprice upwards and a decrease in cost of borrowings, along with a stabilization in deposit pricing.
- Core net interest margin for the quarter ended September 30, 2019 was 3.67% compared to 3.61% and 3.59% for the quarters ended June 30, 2019 and September 30, 2018, respectively. (See the “Non-GAAP Reconciliation of Net Interest Margin” table on page 5 for a description of the elements of core net interest margin.)
- Return on average assets was 1.60% for the third quarter of 2019 compared to 1.26% for the third quarter of 2018. Return on average assets was 1.33% for both the first nine months of 2019 and 2018.
- Core return on average assets for the third quarter of 2019 was 1.58% compared to 1.27% for the third quarter of 2018. Core return on average assets was 1.44% for the first nine months of 2019 compared to 1.32% for the first nine months of 2018. (See the “Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” table on page 11 for the description of core return on average assets.)
- Return on average equity was 12.72% for the third quarter of 2019 compared to 10.87% for the third quarter of 2018. Return on average equity was 10.88% for the first nine months of 2019 compared to 11.43% for the first nine months of 2018.
- Core return on average equity for the third quarter of 2019 was 12.59% compared to 10.95% for the third quarter of 2018. Core return on average equity was 11.83% for the first nine months of 2019 compared to 11.41% for the first nine months of 2018. (See the “Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” table on page 11 for the description of core return on average assets.)
- Horizon’s tangible book value per share increased to $10.31 at September 30, 2019 compared to $9.91 and $9.04 at June 30, 2019 and September 30, 2018, respectively. This represents the highest tangible book value per share in the Company’s history.
- On July 16, 2019, Horizon’s Board of Directors authorized a stock repurchase program for up to 2,250,000 shares of Horizon’s issued and outstanding common stock, no par value. As of September 30, 2019, Horizon had repurchased a total of 99,407 shares at an average price per share of $16.04.
- Horizon consolidated its two Midland, Michigan full-service branches into one location on September 6, 2019.
Craig Dwight, Chairman and CEO of Horizon, commented: “Horizon’s 2019 third quarter and year-to-date performance resulted in record earnings and demonstrate that our long range strategic plan to improve efficiency through an increase in mass and scale is working. Third quarter 2019 earnings increased to $20.5 million, or $0.46 diluted earnings per share, when compared to prior year period earnings of $13.1 million, or $0.34 diluted earnings per share. Year-to-date earnings increased to $48.0 million, or $1.11 diluted earnings per share, compared to $40.0 million, or $1.04 diluted earnings per share, for the prior year period.”
Dwight added, “Horizon’s growth story continues with total assets now reaching approximately $5.2 billion at September 30, 2019. In addition to the loans acquired from our acquisition of Salin Bank and Trust Company during the first quarter of 2019, which totaled approximately $568.9 million, we continue to experience year-to-date loan growth of $118.3 million from the markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo.”
Dwight concluded, “Horizon continues to maximize operational leverage through an increase in mass and scale as evident by the decrease in our adjusted efficiency ratio. Horizon’s adjusted efficiency ratio, excluding merger expenses, loss on sale of investment securities and death benefit on bank owned life insurance decreased to 54.89% for the third quarter of 2019 compared to 57.62% for the second quarter of 2019 and 60.17% for the third quarter of 2018. In addition, annualized non-interest expense to average assets, excluding merger expenses, fell to 2.34% for the third quarter of 2019 compared to 2.39% for the second quarter of 2019 and 2.48% for the third quarter of 2018. Our team continues to leverage new technologies and develop operational efficiencies. In addition, Horizon consolidated its two Midland, Michigan full-service branches into one location on September 6, 2019 in our continued efforts to improve branch efficiencies.”
Income Statement Highlights
Net income for the third quarter of 2019 was $20.5 million, or $0.46 diluted earnings per share, compared to $16.6 million, or $0.37 diluted earnings per share, for the second quarter of 2019 and $13.1 million, or $0.34 diluted earnings per share, for the third quarter of 2018. Excluding acquisition-related expenses, loss on sale of investment securities and death benefit on bank owned life insurance (“core net income”), core net income for the third quarter of 2019 was $20.3 million, or $0.46 diluted earnings per share, compared to $17.6 million, or $0.39 diluted earnings per share, for the second quarter of 2019 and $13.2 million, or $0.34 diluted earnings per share, for the third quarter of 2018.
The increase in net income and diluted earnings per share from the second quarter of 2019 to the third quarter of 2019 reflects increases in net interest income of $1.9 million and non-interest income of $616,000, in addition to decreases in non-interest expense of $1.5 million and provision for loan losses of $520,000, offset by an increase in income tax expense of $699,000.
The increase in net income from the third quarter of 2018 when compared to the same period of 2019 reflects increases in net interest income of $9.7 million and non-interest income of $2.8 million, in addition to a decrease in provision for loan losses of $800,000, offset by increases in non-interest expense of $4.4 million and income tax expense of $1.4 million.
Net income for the nine months ended September 30, 2019 was $48.0 million, or $1.11 diluted earnings per share, compared to $40.0 million, or $1.04 diluted earnings per share, for the nine months ended September 30, 2018. Core net income for the nine months ended September 30, 2019 was $52.1 million, or $1.21 diluted earnings per share, compared to $39.9 million, or $1.04 diluted earnings per share, for the nine months ended September 30, 2018. This represents a 16.3% increase in core diluted earnings per share for the first nine months of 2019 compared to the same period in 2018.
The increase in net income when comparing the first nine months of 2019 to the prior year period reflects increases in net interest income of $18.5 million and non-interest income of $5.2 million, in addition to a decrease in provision for loan losses of $742,000, offset by increases in non-interest expense of $15.0 million and income tax expense of $1.5 million.
| Non-GAAP Reconciliation of Net Income and Diluted Earnings per Share | |||||||||||||||||||
| (Dollars in Thousands, Except per Share Data, Unaudited) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30 | June 30 | September 30 | September 30 | September 30 | |||||||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
| Non-GAAP Reconciliation of Net Income | |||||||||||||||||||
| Net income as reported | $ | 20,537 | $ | 16,642 | $ | 13,065 | $ | 47,995 | $ | 39,984 | |||||||||
| Merger expenses | - | 1,532 | - | 5,650 | - | ||||||||||||||
| Tax effect | - | (295 | ) | - | (987 | ) | - | ||||||||||||
| Net income excluding merger expenses | 20,537 | 17,879 | 13,065 | 52,658 | 39,984 | ||||||||||||||
| Loss on sale of investment securities | - | 100 | 122 | 85 | 111 | ||||||||||||||
| Tax effect | - | (21 | ) | (25 | ) | (18 | ) | (23 | ) | ||||||||||
| Net income excluding loss on sale of investment securities | 20,537 | 17,958 | 13,162 | 52,725 | 40,072 | ||||||||||||||
| Death benefit on bank owned life insurance ("BOLI") | (213 | ) | (367 | ) | - | (580 | ) | (154 | ) | ||||||||||
| Net income excluding death benefit on BOLI | 20,324 | 17,591 | 13,162 | 52,145 | 39,918 | ||||||||||||||
| Core Net Income | $ | 20,324 | $ | 17,591 | $ | 13,162 | $ | 52,145 | $ | 39,918 | |||||||||
| Non-GAAP Reconciliation of Diluted Earnings per Share | |||||||||||||||||||
| Diluted earnings per share ("EPS") as reported | $ | 0.46 | $ | 0.37 | $ | 0.34 | $ | 1.11 | $ | 1.04 | |||||||||
| Merger expenses | - | 0.03 | - | 0.13 | - | ||||||||||||||
| Tax effect | - | - | - | (0.02 | ) | - | |||||||||||||
| Diluted EPS excluding merger expenses | 0.46 | 0.40 | 0.34 | 1.22 | 1.04 | ||||||||||||||
| Loss on sale of investment securities | - | - | - | - | - | ||||||||||||||
| Tax effect | - | - | - | - | - | ||||||||||||||
| Diluted EPS excluding loss on sale of investment securities | 0.46 | 0.40 | 0.34 | 1.22 | 1.04 | ||||||||||||||
| Death benefit on BOLI | (0.01 | ) | (0.01 | ) | - | (0.01 | ) | - | |||||||||||
| Diluted EPS excluding death benefit on BOLI | 0.45 | 0.39 | 0.34 | 1.21 | 1.04 | ||||||||||||||
| Core Diluted EPS | $ | 0.45 | $ | 0.39 | $ | 0.34 | $ | 1.21 | $ | 1.04 | |||||||||
Horizon’s net interest margin increased to 3.82% for the third quarter of 2019 when compared to 3.73% for the second quarter of 2019. The increase in net interest margin reflects an increase in the yield on interest-earning assets of six basis points as loans continued to reprice upwards along with an increase in commercial loan fees of $811,000 when compared to the second quarter of 2019. The cost of interest-bearing liabilities decreased by three basis points primarily from a decrease in the cost of borrowings. In addition, deposit pricing is reducing within the markets we serve in alignment with the recent decline in general market short-term interest rates.
Net interest margin increased to 3.82% for the third quarter of 2019 when compared to 3.67% for the third quarter of 2018. The increase in net interest margin was due to an increase in yield on interest-earning assets of 29 basis points, offset by an increase in the cost on interest-bearing liabilities of 22 basis points. The increase in the yield of interest-earning assets was primarily due to the increase in the yields on loans receivable of 34 basis points and non-taxable investment securities of 25 basis points. The increase in the yields on loans receivable was the result of loans repricing upwards along with an increase in commercial loan fees of $1.2 million when comparing the third quarter of 2019 to the third quarter of 2018. The cost of interest-bearing deposits increased by 33 basis points and was partially offset by a decrease in the cost on borrowings of 12 basis points.
Net interest margin decreased to 3.72% during the first nine months of 2019 when compared to 3.74% for the first nine months of 2018. This decrease reflects an increase in the cost of interest-bearing liabilities of 40 basis points, offset by an increase in the yield of interest-earning assets of 26 basis points. The increase in the cost of interest-bearing liabilities was due to an increase in the cost of interest-bearing deposits of 48 basis points and borrowings of 28 basis points. The increase in the yield of interest-earning assets was due to increases in the yields on loans receivable of 26 basis points, non-taxable investment securities of 37 basis points and taxable investment securities of 15 basis points.
Net interest margin, excluding acquisition-related purchase accounting adjustments (“core net interest margin”), was 3.67% for the third quarter of 2019 compared to 3.61% for the prior quarter and 3.59% for the third quarter of 2018. Interest income from acquisition-related purchase accounting adjustments was $1.7 million, $1.3 million and $789,000 for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively. The increase in the core net interest margin during the third quarter of 2019 was due to a decrease of the cost on borrowings and an increase in the yield on earning assets from higher mortgage warehouse lending balances, loans continuing to reprice higher and the addition of acquired Salin loans.
| Non-GAAP Reconciliation of Net Interest Margin | |||||||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30 | June 30 | September 30 | September 30 | September 30 | |||||||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
| Non-GAAP Reconciliation of Net Interest Margin | |||||||||||||||||||
| Net interest income as reported | $ | 43,463 | $ | 41,529 | $ | 33,772 | $ | 119,272 | $ | 100,733 | |||||||||
| Average interest-earning assets | 4,623,985 | 4,566,674 | 3,717,139 | 4,376,841 | 3,610,277 | ||||||||||||||
| Net interest income as a percentage of average interest-earning assets ("Net Interest Margin") | 3.82 | % | 3.73 | % | 3.67 | % | 3.72 | % | 3.74 | % | |||||||||
| Acquisition-related purchase accounting adjustments ("PAUs") | $ | (1,739 | ) | $ | (1,299 | ) | $ | (789 | ) | $ | (4,548 | ) | $ | (4,460 | ) | ||||
| Core net interest income | $ | 41,724 | $ | 40,230 | $ | 32,983 | $ | 114,724 | $ | 96,273 | |||||||||
| Core net interest margin | 3.67 | % | 3.61 | % | 3.59 | % | 3.58 | % | 3.58 | % | |||||||||
Lending Activity
Total loans increased $653.3 million from $3.014 billion as of December 31, 2018 to $3.668 billion as of September 30, 2019. Excluding acquired loans, total loans increased $84.4 million during the first nine months of 2019 as consumer loans increased by $33.7 million and mortgage warehouse loans increased by $81.5 million, offset by a decrease in commercial loans of $28.2 million and residential mortgage loans of $2.7 million.
| Loan Growth by Type, Excluding Acquired Loans | |||||||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||||||
| September 30 | December 31 | Amount | Acquired | Amount | Percent | ||||||||||||||
| 2019 | 2018 | Change | Loans | Change | Change | ||||||||||||||
| Commercial | $ | 2,046,165 | $ | 1,721,590 | $ | 324,575 | $ | (352,798 | ) | $ | (28,223 | ) | -1.6 | % | |||||
| Residential mortgage | 796,497 | 668,141 | 128,356 | (131,008 | ) | (2,652 | ) | -0.4 | % | ||||||||||
| Consumer | 668,332 | 549,481 | 118,851 | (85,112 | ) | 33,739 | 6.1 | % | |||||||||||
| Subtotal | 3,510,994 | 2,939,212 | 571,782 | (568,918 | ) | 2,864 | 0.1 | % | |||||||||||
| Held for sale loans | 1,060 | 1,038 | 22 | - | 22 | 2.1 | % | ||||||||||||
| Mortgage warehouse loans | 155,631 | 74,120 | 81,511 | - | 81,511 | 110.0 | % | ||||||||||||
| Total loans | $ | 3,667,685 | $ | 3,014,370 | $ | 653,315 | $ | (568,918 | ) | $ | 84,397 | 2.8 | % | ||||||
During the first nine months of 2019, Horizon Bank (the “Bank”) originated approximately $299.5 million of commercial loans, which is a 17% increase compared to the same period in 2018; however, only 56.5%, or $169.1 million, of these loan originations had been funded as of September 30, 2019. These originations were offset by commercial loan payoffs totaling approximately $226.0 million during the first nine months of 2019, which is a 69% increase in payoffs compared to the same period in 2018, as there was an increase in clients moving projects that had reached stabilization into the long-term, fixed rate conduit financing market and properties being sold. During the first nine months of 2018, the Bank originated approximately $256.5 million of commercial loans; however, only 56.2%, or $144.1 million, of these loan originations had been funded as of September 30, 2018. These originations were offset by commercial loan payoffs totaling approximately $134.1 million during the first nine months of 2018.
Residential mortgage lending activity for the three months ended September 30, 2019 generated $2.7 million in income from the gain on sale of mortgage loans, an increase of $624,000 from the second quarter of 2019 and $863,000 from the third quarter of 2018. Total origination volume for the third quarter of 2019, including loans placed into portfolio, totaled $121.1 million, representing an increase of 8.7% from the second quarter of 2019 and an increase of 20.4% from the third quarter of 2018. Total origination volume for the third quarter of 2019 of loans sold to the secondary market totaled $95.0 million, representing an increase of 56.7% from the second quarter of 2019 and an increase of 60.3% from the third quarter of 2018.
Revenue derived from Horizon’s residential mortgage and warehouse lending activities was 5.8% of Horizon’s total revenue for the nine months ended September 30, 2019, which is comparable to the same prior year period.
The provision for loan losses totaled $376,000 for the third quarter of 2019 compared to $896,000 for the second quarter of 2019 and $1.2 million for the third quarter of 2018.
The provision for loan losses totaled $1.6 million for the first nine months of 2019 compared to $2.4 million for the first nine months of 2018.
The ratio of the allowance for loan losses to total loans decreased to 0.49% as of September 30, 2019 from 0.59% at December 31, 2018. The decrease in the ratio of the allowance for loan losses to total loans is primarily due to increased loan balances from the Salin acquisition. The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 0.65% as of September 30, 2019 compared to 0.72% as of December 31, 2018. Loan loss reserves plus credit-related loan discounts on acquired loans as a percentage of total loans was 1.07% as of September 30, 2019 compared to 0.98% as of December 31, 2018.
| Non-GAAP Allowance for Loan and Lease Loss Detail | |||||||||||||||||||||||
| As of September 30, 2019 | |||||||||||||||||||||||
| (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 | $ | 2,779,961 | $ | 17,946 | N/A | $ | 17,946 | $ | 2,762,015 | 0.65 | % | 0.00 | % | 0.65 | % | ||||||||
| Heartland | 5,244 | - | 589 | 589 | 4,655 | 0.00 | % | 11.23 | % | 11.23 | % | ||||||||||||
| Summit | 16,191 | - | 987 | 987 | 15,204 | 0.00 | % | 6.10 | % | 6.10 | % | ||||||||||||
| Peoples | 71,941 | - | 1,669 | 1,669 | 70,272 | 0.00 | % | 2.32 | % | 2.32 | % | ||||||||||||
| Kosciusko | 30,580 | - | 528 | 528 | 30,052 | 0.00 | % | 1.73 | % | 1.73 | % | ||||||||||||
| LaPorte | 70,442 | 10 | 2,461 | 2,471 | 67,971 | 0.01 | % | 3.49 | % | 3.50 | % | ||||||||||||
| CNB | 3,498 | - | 88 | 88 | 3,410 | 0.00 | % | 2.52 | % | 2.52 | % | ||||||||||||
| Lafayette | 63,805 | - | 519 | 519 | 63,286 | 0.00 | % | 0.81 | % | 0.81 | % | ||||||||||||
| Wolverine | 136,829 | - | 729 | 729 | 136,100 | 0.00 | % | 0.53 | % | 0.53 | % | ||||||||||||
| Salin | 489,194 | - | 13,797 | 13,797 | 475,397 | 0.00 | % | 2.82 | % | 2.82 | % | ||||||||||||
| Total | $ | 3,667,685 | $ | 17,956 | $ | 21,367 | $ | 39,323 | $ | 3,628,362 | 0.49 | % | 0.58 | % | 1.07 | % | |||||||
As of September 30, 2019, non-performing loans totaled $19.2 million, which reflects a two basis point increase in non-performing loans to total loans, or a $4.0 million increase from $15.2 million in non-performing loans as of December 31, 2018. Compared to December 31, 2018, non-performing commercial loans increased by $1.3 million, non-performing real estate loans increased by $2.2 million and non-performing consumer loans increased by $485,000. Other real estate owned and repossessed assets totaled $4.0 million as of September 30, 2019 which is an increase of $2.0 million from December 31, 2018. The majority of this increase was due to other real estate owned properties acquired in the Salin transaction, including the closed branches, totaling $1.7 million.
As of September 30, 2019, substandard loans totaled $62.1 million, which is an increase of $14.4 million from June 30, 2019. This increase in substandard loans was primarily due to four unrelated relationships, each from a different industry, being downgraded during the quarter. We do not believe this increase to be an indication of the overall quality of our loan portfolio as evident by our steady non-performing loans to total loans ratio of 0.52% as of September 30, 2019 and other non-performing and substandard relationships showing improvement.
Expense Management
Total non-interest expense was $1.5 million lower in the third quarter of 2019 when compared to the second quarter of 2019. FDIC insurance, other expense, professional fees, and outside services and consultants decreased by $638,000, $572,000, $263,000 and $103,000, respectively. Offsetting these decreases was an increase in loan expense of $150,000. FDIC insurance decreased due to assessment credits the Bank received during the third quarter of 2019 as the FDIC reserve is currently overfunded. Excluding merger expenses, total non-interest expense held steady at $30.1 million when comparing the third quarter of 2019 to the second quarter of 2019.
| Three Months Ended | |||||||||||||||||||||||||||||
| September 30 | June 30 | ||||||||||||||||||||||||||||
| 2019 | 2019 | Adjusted | |||||||||||||||||||||||||||
| Non-interest Expense | Actual | Merger Expenses | Adjusted | Actual | Merger Expenses | Adjusted | Amount Change | Percent Change | |||||||||||||||||||||
| Salaries and employee benefits | $ | 16,948 | $ | - | $ | 16,948 | $ | 16,951 | $ | (482 | ) | $ | 16,469 | $ | 479 | 2.9 | % | ||||||||||||
| Net occupancy expenses | 3,131 | - | 3,131 | 3,148 | (75 | ) | 3,073 | 58 | 1.9 | % | |||||||||||||||||||
| Data processing | 2,140 | - | 2,140 | 2,139 | (68 | ) | 2,071 | 69 | 3.3 | % | |||||||||||||||||||
| Professional fees | 335 | - | 335 | 598 | (153 | ) | 445 | (110 | ) | -24.7 | % | ||||||||||||||||||
| Outside services and consultants | 1,552 | - | 1,552 | 1,655 | (176 | ) | 1,479 | 73 | 4.9 | % | |||||||||||||||||||
| Loan expense | 2,198 | - | 2,198 | 2,048 | (2 | ) | 2,046 | 152 | 7.4 | % | |||||||||||||||||||
| FDIC deposit insurance | (273 | ) | - | (273 | ) | 365 | - | 365 | (638 | ) | -174.8 | % | |||||||||||||||||
| Other losses | 90 | - | 90 | 169 | (69 | ) | 100 | (10 | ) | -10.0 | % | ||||||||||||||||||
| Other expenses | 3,939 | - | 3,939 | 4,511 | (507 | ) | 4,004 | (65 | ) | -1.6 | % | ||||||||||||||||||
| Total non-interest expense | $ | 30,060 | $ | - | $ | 30,060 | $ | 31,584 | $ | (1,532 | ) | $ | 30,052 | $ | 8 | 0.0 | % | ||||||||||||
| Annualized Non-interest Exp. to Avg. Assets | 2.34 | % | 2.34 | % | 2.51 | % | 2.39 | % | |||||||||||||||||||||
Total non-interest expense was $4.4 million higher during the third quarter of 2019 compared to the same period of 2018. Salaries and employee benefits, other expense, net occupancy expense, loan expense, data processing and outside services and consultants increased $2.6 million, $836,000, $636,000, $476,000, $381,000 and $348,000, respectively. These increases were offset by a decrease of $669,000 in FDIC insurance and $102,000 in professional fees. FDIC insurance decreased due to assessment credits the Bank received during the third quarter of 2019 as the FDIC reserve is currently overfunded.
| Three Months Ended | ||||||||||||||||||||||||||||
| September 30 | September 30 | |||||||||||||||||||||||||||
| 2019 | 2018 | Adjusted | ||||||||||||||||||||||||||
| Non-interest Expense | Actual | Merger Expenses | Adjusted | Actual | Merger Expenses | Adjusted | Amount Change | Percent Change | ||||||||||||||||||||
| Salaries and employee benefits | $ | 16,948 | $ | - | $ | 16,948 | $ | 14,343 | $ | - | $ | 14,343 | $ | 2,605 | 18.2 | % | ||||||||||||
| Net occupancy expenses | 3,131 | - | 3,131 | 2,495 | - | 2,495 | 636 | 25.5 | % | |||||||||||||||||||
| Data processing | 2,140 | - | 2,140 | 1,759 | - | 1,759 | 381 | 21.7 | % | |||||||||||||||||||
| Professional fees | 335 | - | 335 | 437 | - | 437 | (102 | ) | -23.3 | % | ||||||||||||||||||
| Outside services and consultants | 1,552 | - | 1,552 | 1,204 | - | 1,204 | 348 | 28.9 | % | |||||||||||||||||||
| Loan expense | 2,198 | - | 2,198 | 1,722 | - | 1,722 | 476 | 27.6 | % | |||||||||||||||||||
| FDIC deposit insurance | (273 | ) | - | (273 | ) | 396 | - | 396 | (669 | ) | -168.9 | % | ||||||||||||||||
| Other losses | 90 | - | 90 | 161 | - | 161 | (71 | ) | -44.1 | % | ||||||||||||||||||
| Other expenses | 3,939 | - | 3,939 | 3,103 | - | 3,103 | 836 | 26.9 | % | |||||||||||||||||||
| Total non-interest expense | $ | 30,060 | $ | - | $ | 30,060 | $ | 25,620 | $ | - | $ | 25,620 | $ | 4,440 | 17.3 | % | ||||||||||||
| Annualized Non-interest Exp. to Avg. Assets | 2.34 | % | 2.34 | % | 2.48 | % | 2.48 | % | ||||||||||||||||||||
Total non-interest expense was $15.0 million higher during the first nine months of 2019 when compared to the first nine months of 2018. Salaries and employee benefits, other expenses, outside services and consultants, loan expense, data processing and net occupancy increased $5.8 million, $3.1 million, $3.0 million, $1.7 million, $1.2 million and $1.1 million, respectively. Offsetting these increases was a decrease in FDIC insurance of $799,000 and other losses of $213,000. FDIC insurance decreased due to the assessment credits the Bank received during the third quarter of 2019 as the FDIC reserve is currently overfunded. Excluding merger expenses, total non-interest expense increased $9.3 million during the first nine months of 2019 when compared to the same period of 2018.
| Nine Months Ended | |||||||||||||||||||||||||||||
| September 30 | September 30 | ||||||||||||||||||||||||||||
| 2019 | 2018 | Adjusted | |||||||||||||||||||||||||||
| Non-interest Expense | Actual | Merger Expenses | Adjusted | Actual | Merger Expenses | Adjusted | Amount Change | Percent Change | |||||||||||||||||||||
| Salaries and employee benefits | $ | 48,365 | $ | (484 | ) | $ | 47,881 | $ | 42,525 | $ | - | $ | 42,525 | $ | 5,356 | 12.6 | % | ||||||||||||
| Net occupancy expenses | 9,051 | (75 | ) | 8,976 | 7,981 | - | 7,981 | 995 | 12.5 | % | |||||||||||||||||||
| Data processing | 6,245 | (360 | ) | 5,885 | 5,062 | - | 5,062 | 823 | 16.3 | % | |||||||||||||||||||
| Professional fees | 1,426 | (392 | ) | 1,034 | 1,314 | - | 1,314 | (280 | ) | -21.3 | % | ||||||||||||||||||
| Outside services and consultants | 6,737 | (2,466 | ) | 4,271 | 3,735 | - | 3,735 | 536 | 14.4 | % | |||||||||||||||||||
| Loan expense | 6,195 | (2 | ) | 6,193 | 4,504 | - | 4,504 | 1,689 | 37.5 | % | |||||||||||||||||||
| FDIC deposit insurance | 252 | - | 252 | 1,051 | - | 1,051 | (799 | ) | -76.0 | % | |||||||||||||||||||
| Other losses | 363 | (71 | ) | 292 | 576 | - | 576 | (284 | ) | -49.3 | % | ||||||||||||||||||
| Other expenses | 12,748 | (1,800 | ) | 10,948 | 9,651 | - | 9,651 | 1,297 | 13.4 | % | |||||||||||||||||||
| Total non-interest expense | $ | 91,382 | $ | (5,650 | ) | $ | 85,732 | $ | 76,399 | $ | - | $ | 76,399 | $ | 9,333 | 12.2 | % | ||||||||||||
| Annualized Non-interest Exp. to Avg. Assets | 2.53 | % | 2.38 | % | 2.54 | % | 2.54 | % | |||||||||||||||||||||
Annualized non-interest expense as a percent of average assets were 2.34%, 2.51% and 2.48% for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively. Annualized non-interest expense, excluding merger expenses, as a percent of average assets continue to decline and were 2.34%, 2.39% and 2.48% for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively.
Annualized non-interest expense as a percent of average assets were 2.53% and 2.54% for the first nine months of 2019 and 2018, respectively. Annualized non-interest expense, excluding merger expenses, as a percent of average assets were 2.38% and 2.54% for the first nine months of 2019 and 2018, respectively. Horizon’s strategy to build mass and scale continues to prove effective.
Income tax expense totaled $4.0 million for the third quarter of 2019, an increase of $699,000 when compared to the second quarter of 2019 and an increase of $1.4 million when compared to the third quarter of 2018. The increase in income tax expense from the second quarter of 2019 and the third quarter of 2018 was primarily due to increases in income before income taxes of $4.6 million and $8.9 million, respectively, when compared to the third quarter of 2019.
Income tax expense totaled $9.4 million for the first nine months of 2019, an increase of $1.5 million when compared to the first nine months of 2018. The increase in income tax expense from the first nine months of 2018 was primarily due to an increase in income before income taxes of $9.5 million when compared to the same period of 2019.
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, 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) | ||||||||||||||
| September 30 | June 30 | March 31 | December 31 | September 30 | ||||||||||
| 2019 | 2019 | 2019 | 2018 | 2018 | ||||||||||
| Total stockholders' equity | $ | 642,711 | $ | 626,461 | $ | 609,468 | $ | 491,992 | $ | 477,594 | ||||
| Less: Intangible assets | 178,896 | 179,776 | 176,864 | 130,270 | 130,755 | |||||||||
| Total tangible stockholders' equity | $ | 463,815 | $ | 446,685 | $ | 432,604 | $ | 361,722 | $ | 346,839 | ||||
| Common shares outstanding | 44,969,021 | 45,061,372 | 45,052,747 | 38,375,407 | 38,367,890 | |||||||||
| Tangible book value per common share | $ | 10.31 | $ | 9.91 | $ | 9.60 | $ | 9.43 | $ | 9.04 | ||||
| Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio | |||||||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30 | June 30 | September 30 | September 30 | September 30 | |||||||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
| Non-GAAP Calculation of Efficiency Ratio | |||||||||||||||||||
| Non-interest expense as reported | $ | 30,060 | $ | 31,584 | $ | 25,620 | $ | 91,382 | $ | 76,399 | |||||||||
| Net interest income as reported | 43,463 | 41,529 | 33,772 | 119,272 | 100,733 | ||||||||||||||
| Non-interest income as reported | 11,514 | 10,898 | 8,686 | 31,124 | 25,936 | ||||||||||||||
| Non-interest expense/(Net interest income + Non-interest income) ("Efficiency Ratio") | 54.68 | % | 60.24 | % | 60.34 | % | 60.76 | % | 60.31 | % | |||||||||
| Non-GAAP Reconciliation of Adjusted Efficiency Ratio | |||||||||||||||||||
| Non-interest expense as reported | $ | 30,060 | $ | 31,584 | $ | 25,620 | $ | 91,382 | $ | 76,399 | |||||||||
| Merger expenses | - | (1,532 | ) | - | (5,650 | ) | - | ||||||||||||
| Non-interest expense excluding merger expenses | 30,060 | 30,052 | 25,620 | 85,732 | 76,399 | ||||||||||||||
| Net interest income as reported | 43,463 | 41,529 | 33,772 | 119,272 | 100,733 | ||||||||||||||
| Non-interest income as reported | 11,514 | 10,898 | 8,686 | 31,124 | 25,936 | ||||||||||||||
| Loss on sale of investment securities | - | 100 | 122 | 85 | 111 | ||||||||||||||
| Death benefit on bank owned life insurance ("BOLI") | (213 | ) | (367 | ) | - | (580 | ) | (154 | ) | ||||||||||
| Non-interest income excluding loss on sale of investment securities and death benefit on BOLI | 11,301 | 10,631 | 8,808 | 30,629 | 25,893 | ||||||||||||||
| Adjusted efficiency ratio | 54.89 | % | 57.62 | % | 60.17 | % | 57.19 | % | 60.33 | % | |||||||||
| Non-GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity | |||||||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| September 30 | June 30 | September 30 | September 30 | September 30 | |||||||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
| Non-GAAP Reconciliation of Return on Average Assets | |||||||||||||||||||
| Average Assets | $ | 5,107,259 | $ | 5,047,365 | $ | 4,105,096 | $ | 4,823,601 | $ | 4,021,811 | |||||||||
| Return on average assets ("ROAA") as reported | 1.60 | % | 1.32 | % | 1.26 | % | 1.33 | % | 1.33 | % | |||||||||
| Merger expenses | 0.00 | % | 0.12 | % | 0.00 | % | 0.16 | % | 0.00 | % | |||||||||
| Tax effect | 0.00 | % | -0.02 | % | 0.00 | % | -0.03 | % | 0.00 | % | |||||||||
| ROAA excluding merger expenses | 1.60 | % | 1.42 | % | 1.26 | % | 1.46 | % | 1.33 | % | |||||||||
| Loss on sale of investment securities | 0.00 | % | 0.01 | % | 0.01 | % | 0.00 | % | 0.00 | % | |||||||||
| Tax effect | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | |||||||||
| ROAA excluding gain on sale of investment securities | 1.60 | % | 1.43 | % | 1.27 | % | 1.46 | % | 1.33 | % | |||||||||
| Death benefit on bank owned life insurance ("BOLI") | -0.02 | % | -0.03 | % | 0.00 | % | -0.02 | % | -0.01 | % | |||||||||
| ROAA excluding death benefit on BOLI | 1.58 | % | 1.40 | % | 1.27 | % | 1.44 | % | 1.32 | % | |||||||||
| Core ROAA | 1.58 | % | 1.40 | % | 1.27 | % | 1.44 | % | 1.32 | % | |||||||||
| Non-GAAP Reconciliation of Return on Average Common Equity | |||||||||||||||||||
| Average Common Equity | $ | 640,770 | $ | 622,028 | $ | 476,959 | $ | 589,766 | $ | 467,867 | |||||||||
| Return on average common equity ("ROACE") as reported | 12.72 | % | 10.73 | % | 10.87 | % | 10.88 | % | 11.43 | % | |||||||||
| Merger expenses | 0.00 | % | 0.99 | % | 0.00 | % | 1.28 | % | 0.00 | % | |||||||||
| Tax effect | 0.00 | % | -0.19 | % | 0.00 | % | -0.22 | % | 0.00 | % | |||||||||
| ROACE excluding merger expenses | 12.72 | % | 11.53 | % | 10.87 | % | 11.94 | % | 11.43 | % | |||||||||
| Loss on sale of investment securities | 0.00 | % | 0.06 | % | 0.10 | % | 0.02 | % | 0.03 | % | |||||||||
| Tax effect | 0.00 | % | -0.01 | % | -0.02 | % | 0.00 | % | -0.01 | % | |||||||||
| ROACE excluding gain on sale of investment securities | 12.72 | % | 11.58 | % | 10.95 | % | 11.96 | % | 11.45 | % | |||||||||
| Death benefit on bank owned life insurance ("BOLI") | -0.13 | % | -0.24 | % | 0.00 | % | -0.13 | % | -0.04 | % | |||||||||
| ROAA excluding death benefit on BOLI | 12.59 | % | 11.34 | % | 10.95 | % | 11.83 | % | 11.41 | % | |||||||||
| Core ROACE | 12.59 | % | 11.34 | % | 10.95 | % | 11.83 | % | 11.41 | % | |||||||||
About Horizon Bancorp, Inc.
Horizon Bancorp, Inc. is an independent, commercial bank holding company serving northern and central Indiana, and southern and central Michigan through its commercial banking subsidiary, Horizon Bank. 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)
| September 30 | June 30 | March 31 | December 31 | September 30 | |||||||||||||||
| 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
| Balance sheet: | |||||||||||||||||||
| Total assets | $ | 5,186,714 | $ | 5,098,682 | $ | 5,051,639 | $ | 4,246,688 | $ | 4,150,561 | |||||||||
| Investment securities | 977,536 | 887,187 | 893,469 | 810,460 | 766,153 | ||||||||||||||
| Commercial loans | 2,046,165 | 2,062,623 | 2,089,579 | 1,721,590 | 1,698,582 | ||||||||||||||
| Mortgage warehouse loans | 155,631 | 133,428 | 71,944 | 74,120 | 71,422 | ||||||||||||||
| Residential mortgage loans | 796,497 | 814,065 | 819,824 | 668,141 | 651,250 | ||||||||||||||
| Consumer loans | 668,332 | 654,552 | 639,710 | 549,481 | 536,132 | ||||||||||||||
| Earnings assets | 4,667,668 | 4,577,487 | 4,538,952 | 3,842,903 | 3,743,592 | ||||||||||||||
| Non-interest bearing deposit accounts | 756,707 | 810,350 | 811,768 | 642,129 | 621,475 | ||||||||||||||
| Interest bearing transaction accounts | 2,173,100 | 2,153,189 | 2,115,847 | 1,684,336 | 1,605,825 | ||||||||||||||
| Time deposits | 986,150 | 967,236 | 960,408 | 812,911 | 901,254 | ||||||||||||||
| Borrowings | 516,591 | 436,233 | 457,788 | 550,384 | 477,719 | ||||||||||||||
| Subordinated debentures | 56,250 | 56,194 | 55,310 | 37,837 | 37,791 | ||||||||||||||
| Total stockholders' equity | 642,711 | 626,461 | 609,468 | 491,992 | 477,594 | ||||||||||||||
| Three months ended | |||||||||||||||||||
| Income statement: | |||||||||||||||||||
| Net interest income | $ | 43,463 | $ | 41,529 | $ | 34,280 | $ | 33,836 | $ | 33,772 | |||||||||
| Provision for loan losses | 376 | 896 | 364 | 528 | 1,176 | ||||||||||||||
| Non-interest income | 11,514 | 10,898 | 8,712 | 8,477 | 8,686 | ||||||||||||||
| Non-interest expenses | 30,060 | 31,584 | 29,738 | 26,117 | 25,620 | ||||||||||||||
| Income tax expense | 4,004 | 3,305 | 2,074 | 2,535 | 2,597 | ||||||||||||||
| Net income | $ | 20,537 | $ | 16,642 | $ | 10,816 | $ | 13,133 | $ | 13,065 | |||||||||
| Per share data:(1) | |||||||||||||||||||
| Basic earnings per share | $ | 0.46 | $ | 0.37 | $ | 0.28 | $ | 0.34 | $ | 0.34 | |||||||||
| Diluted earnings per share | 0.46 | 0.37 | 0.28 | 0.34 | 0.34 | ||||||||||||||
| Cash dividends declared per common share | 0.12 | 0.12 | 0.10 | 0.10 | 0.10 | ||||||||||||||
| Book value per common share | 14.29 | 13.90 | 13.53 | 12.82 | 12.45 | ||||||||||||||
| Tangible book value per common share | 10.31 | 9.91 | 9.60 | 9.43 | 9.04 | ||||||||||||||
| Market value - high | 17.77 | 17.13 | 17.82 | 19.40 | 21.39 | ||||||||||||||
| Market value - low | $ | 15.93 | $ | 15.51 | $ | 15.50 | $ | 14.94 | $ | 19.44 | |||||||||
| Weighted average shares outstanding - Basic | 45,038,021 | 45,055,117 | 38,822,543 | 38,367,972 | 38,365,379 | ||||||||||||||
| Weighted average shares outstanding - Diluted | 45,113,730 | 45,130,408 | 38,906,172 | 38,488,002 | 38,534,970 | ||||||||||||||
| Key ratios: | |||||||||||||||||||
| Return on average assets | 1.60 | % | 1.32 | % | 1.02 | % | 1.25 | % | 1.26 | % | |||||||||
| Return on average common stockholders' equity | 12.72 | 10.73 | 8.66 | 10.73 | 10.87 | ||||||||||||||
| Net interest margin | 3.82 | 3.73 | 3.62 | 3.60 | 3.67 | ||||||||||||||
| Loan loss reserve to total loans | 0.49 | 0.50 | 0.49 | 0.59 | 0.60 | ||||||||||||||
| Average equity to average assets | 12.55 | 12.32 | 11.76 | 11.62 | 11.62 | ||||||||||||||
| Bank only capital ratios: | |||||||||||||||||||
| Tier 1 capital to average assets | 9.39 | 9.52 | 10.99 | 9.38 | 9.53 | ||||||||||||||
| Tier 1 capital to risk weighted assets | 11.69 | 11.76 | 11.84 | 11.91 | 12.09 | ||||||||||||||
| Total capital to risk weighted assets | 12.14 | 12.23 | 12.30 | 12.47 | 12.66 | ||||||||||||||
| Loan data: | |||||||||||||||||||
| Substandard loans | $ | 62,130 | $ | 47,764 | $ | 41,728 | $ | 38,775 | $ | 34,655 | |||||||||
| 30 to 89 days delinquent | 10,204 | 9,633 | 9,980 | 7,161 | 6,878 | ||||||||||||||
| 90 days and greater delinquent - accruing interest | $ | 34 | $ | 391 | $ | 192 | $ | 568 | $ | 202 | |||||||||
| Trouble debt restructures - accruing interest | 3,491 | 2,198 | 2,532 | 2,002 | 1,830 | ||||||||||||||
| Trouble debt restructures - non-accrual | 1,807 | 1,576 | 1,349 | 1,057 | 1,077 | ||||||||||||||
| Non-accural loans | 13,823 | 14,764 | 15,313 | 11,548 | 11,417 | ||||||||||||||
| Total non-performing loans | $ | 19,155 | $ | 18,929 | $ | 19,386 | $ | 15,175 | $ | 14,526 | |||||||||
| Non-performing loans to total loans | 0.52 | % | 0.52 | % | 0.54 | % | 0.50 | % | 0.49 | % | |||||||||
| (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)
| September 30 | September 30 | |||||||
| 2019 | 2018 | |||||||
| Balance sheet: | ||||||||
| Total assets | $ | 5,186,714 | $ | 4,150,561 | ||||
| Investment securities | 977,536 | 766,153 | ||||||
| Commercial loans | 2,046,165 | 1,698,582 | ||||||
| Mortgage warehouse loans | 155,631 | 71,422 | ||||||
| Residential mortgage loans | 796,497 | 651,250 | ||||||
| Consumer loans | 668,332 | 536,132 | ||||||
| Earnings assets | 4,667,668 | 3,743,592 | ||||||
| Non-interest bearing deposit accounts | 756,707 | 621,475 | ||||||
| Interest bearing transaction accounts | 2,173,100 | 1,605,825 | ||||||
| Time deposits | 986,150 | 901,254 | ||||||
| Borrowings | 516,591 | 477,719 | ||||||
| Subordinated debentures | 56,250 | 37,791 | ||||||
| Total stockholders' equity | 642,711 | 477,594 | ||||||
| Nine months ended | ||||||||
| Income statement: | ||||||||
| Net interest income | $ | 119,272 | $ | 100,733 | ||||
| Provision for loan losses | 1,636 | 2,378 | ||||||
| Non-interest income | 31,124 | 25,936 | ||||||
| Non-interest expenses | 91,382 | 76,399 | ||||||
| Income tax expense | 9,383 | 7,908 | ||||||
| Net income | $ | 47,995 | $ | 39,984 | ||||
| Per share data:(1) | ||||||||
| Basic earnings per share | $ | 1.12 | $ | 1.04 | ||||
| Diluted earnings per share | 1.11 | 1.04 | ||||||
| Cash dividends declared per common share | 0.34 | 0.30 | ||||||
| Book value per common share | 14.29 | 12.45 | ||||||
| Tangible book value per common share | 10.31 | 9.04 | ||||||
| Market value - high | 17.82 | 21.94 | ||||||
| Market value - low | $ | 15.50 | $ | 17.87 | ||||
| Weighted average shares outstanding - Basic | 42,995,082 | 38,340,012 | ||||||
| Weighted average shares outstanding - Diluted | 43,070,095 | 38,503,403 | ||||||
| Key ratios: | ||||||||
| Return on average assets | 1.33 | % | 1.33 | % | ||||
| Return on average common stockholders' equity | 10.88 | 11.43 | ||||||
| Net interest margin | 3.72 | 3.74 | ||||||
| Loan loss reserve to total loans | 0.49 | 0.60 | ||||||
| Average equity to average assets | 12.23 | 11.63 | ||||||
| Bank only capital ratios: | ||||||||
| Tier 1 capital to average assets | 9.39 | 9.53 | ||||||
| Tier 1 capital to risk weighted assets | 11.69 | 12.09 | ||||||
| Total capital to risk weighted assets | 12.14 | 12.66 | ||||||
| Loan data: | ||||||||
| Substandard loans | $ | 62,130 | $ | 34,655 | ||||
| 30 to 89 days delinquent | 10,204 | 6,878 | ||||||
| 90 days and greater delinquent - accruing interest | $ | 34 | $ | 202 | ||||
| Trouble debt restructures - accruing interest | 3,491 | 1,830 | ||||||
| Trouble debt restructures - non-accrual | 1,807 | 1,077 | ||||||
| Non-accural loans | 13,823 | 11,417 | ||||||
| Total non-performing loans | $ | 19,155 | $ | 14,526 | ||||
| Non-performing loans to total loans | 0.52 | % | 0.49 | % | ||||
| (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) | |||||||||||||||||||
| September 30 | June 30 | March 31 | December 31 | September 30 | |||||||||||||||
| 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
| Commercial | $ | 12,082 | $ | 11,881 | $ | 11,556 | $ | 10,495 | $ | 10,581 | |||||||||
| Real estate | 1,449 | 1,732 | 1,588 | 1,676 | 1,574 | ||||||||||||||
| Mortgage warehousing | 1,041 | 1,040 | 1,014 | 1,006 | 1,030 | ||||||||||||||
| Consumer | 3,384 | 3,652 | 3,663 | 4,643 | 4,613 | ||||||||||||||
| Total | $ | 17,956 | $ | 18,305 | $ | 17,821 | $ | 17,820 | $ | 17,798 | |||||||||
| Net Charge-Offs (Recoveries) | |||||||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||||||
| Three Months Ended | |||||||||||||||||||
| September 30 | June 30 | March 31 | December 31 | September 30 | |||||||||||||||
| 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
| Commercial | $ | 192 | $ | 265 | $ | 61 | $ | 196 | $ | 179 | |||||||||
| Real estate | (7 | ) | 41 | (27 | ) | 47 | (2 | ) | |||||||||||
| Mortgage warehousing | - | - | - | - | - | ||||||||||||||
| Consumer | 540 | 106 | 329 | 263 | 272 | ||||||||||||||
| Total | $ | 725 | $ | 412 | $ | 363 | $ | 506 | $ | 449 | |||||||||
| Percent of net charge-offs to average loans outstanding for the period | 0.02 | % | 0.01 | % | 0.01 | % | 0.02 | % | 0.02 | % | |||||||||
| Total Non-performing Loans | |||||||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||||||
| September 30 | June 30 | March 31 | December 31 | September 30 | |||||||||||||||
| 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
| Commercial | $ | 8,193 | $ | 8,697 | $ | 9,750 | $ | 6,903 | $ | 8,355 | |||||||||
| Real estate | 7,212 | 6,444 | 5,995 | 5,007 | 3,754 | ||||||||||||||
| Mortgage warehousing | - | - | - | - | - | ||||||||||||||
| Consumer | 3,750 | 3,788 | 3,641 | 3,265 | 2,417 | ||||||||||||||
| Total | $ | 19,155 | $ | 18,929 | $ | 19,386 | $ | 15,175 | $ | 14,526 | |||||||||
| Non-performing loans to total loans | 0.52 | % | 0.52 | % | 0.54 | % | 0.55 | % | 0.49 | % | |||||||||
| Other Real Estate Owned and Repossessed Assets | |||||||||||||||||||
| (Dollars in Thousands, Unaudited) | |||||||||||||||||||
| September 30 | June 30 | March 31 | December 31 | September 30 | |||||||||||||||
| 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
| Commercial | $ | 3,972 | $ | 3,694 | $ | 3,496 | $ | 1,967 | $ | 2,181 | |||||||||
| Real estate | 48 | 113 | 126 | 60 | 58 | ||||||||||||||
| Mortgage warehousing | - | - | - | - | - | ||||||||||||||
| Consumer | 24 | 48 | 30 | 48 | 26 | ||||||||||||||
| Total | $ | 4,044 | $ | 3,855 | $ | 3,652 | $ | 2,075 | $ | 2,265 | |||||||||
HORIZON BANCORP, INC.
Average Balance Sheets
(Dollar Amounts in Thousands, Unaudited)
| Three Months Ended | Three Months Ended | ||||||||||||||||||||
| September 30, 2019 | September 30, 2018 | ||||||||||||||||||||
| Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||
| Assets | |||||||||||||||||||||
| Interest-earning assets | |||||||||||||||||||||
| Federal funds sold | $ | 18,133 | $ | 115 | 2.52 | % | $ | 3,840 | $ | 24 | 2.48 | % | |||||||||
| Interest-earning deposits | 17,823 | 93 | 2.07 | % | 24,494 | 104 | 1.68 | % | |||||||||||||
| Investment securities - taxable | 478,764 | 2,949 | 2.44 | % | 421,681 | 2,611 | 2.46 | % | |||||||||||||
| Investment securities - non-taxable(1) | 462,997 | 3,099 | 3.36 | % | 324,289 | 2,010 | 3.11 | % | |||||||||||||
| Loans receivable(2)(3) | 3,646,268 | 49,455 | 5.41 | % | 2,942,835 | 37,522 | 5.07 | % | |||||||||||||
| Total interest-earning assets(1) | 4,623,985 | 55,711 | 4.87 | % | 3,717,139 | 42,271 | 4.58 | % | |||||||||||||
| Non-interest-earning assets | |||||||||||||||||||||
| Cash and due from banks | 66,970 | 45,864 | |||||||||||||||||||
| Allowance for loan losses | (18,277 | ) | (17,090 | ) | |||||||||||||||||
| Other assets | 434,581 | 359,183 | |||||||||||||||||||
| Total average assets | $ | 5,107,259 | $ | 4,105,096 | |||||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||
| Interest-bearing deposits | $ | 3,132,852 | $ | 9,109 | 1.15 | % | $ | 2,438,450 | $ | 5,023 | 0.82 | % | |||||||||
| Borrowings | 413,859 | 2,275 | 2.18 | % | 496,054 | 2,876 | 2.30 | % | |||||||||||||
| Subordinated debentures | 54,433 | 864 | 6.30 | % | 36,570 | 600 | 6.51 | % | |||||||||||||
| Total interest-bearing liabilities | 3,601,144 | 12,248 | 1.35 | % | 2,971,074 | 8,499 | 1.13 | % | |||||||||||||
| Non-interest-bearing liabilities | |||||||||||||||||||||
| Demand deposits | 818,164 | 640,983 | |||||||||||||||||||
| Accrued interest payable and other liabilities | 47,181 | 16,080 | |||||||||||||||||||
| Stockholders' equity | 640,770 | 476,959 | |||||||||||||||||||
| Total average liabilities and stockholders' equity | $ | 5,107,259 | $ | 4,105,096 | |||||||||||||||||
| Net interest income/spread | $ | 43,463 | 3.52 | % | $ | 33,772 | 3.44 | % | |||||||||||||
| Net interest income as a percentage of average interest-earning assets(1) | 3.82 | % | 3.67 | % | |||||||||||||||||
| (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)
| Nine Months Ended | Nine Months Ended | ||||||||||||||||||||
| September 30, 2019 | September 30, 2018 | ||||||||||||||||||||
| Average Balance | Interest | Average Rate | Average Balance | Interest | Average Rate | ||||||||||||||||
| Assets | |||||||||||||||||||||
| Interest-earning assets | |||||||||||||||||||||
| Federal funds sold | $ | 14,778 | $ | 339 | 3.07 | % | $ | 2,845 | $ | 53 | 2.49 | % | |||||||||
| Interest-earning deposits | 21,938 | 284 | 1.73 | % | 25,411 | 300 | 1.58 | % | |||||||||||||
| Investment securities - taxable | 469,330 | 8,929 | 2.54 | % | 413,617 | 7,379 | 2.39 | % | |||||||||||||
| Investment securities - non-taxable(1) | 423,141 | 8,520 | 3.37 | % | 313,168 | 5,745 | 3.00 | % | |||||||||||||
| Loans receivable(2)(3) | 3,447,654 | 136,862 | 5.32 | % | 2,855,236 | 108,961 | 5.06 | % | |||||||||||||
| Total interest-earning assets(1) | 4,376,841 | 154,934 | 4.81 | % | 3,610,277 | 122,438 | 4.55 | % | |||||||||||||
| Non-interest-earning assets | |||||||||||||||||||||
| Cash and due from banks | 58,890 | 44,605 | |||||||||||||||||||
| Allowance for loan losses | (18,053 | ) | (16,686 | ) | |||||||||||||||||
| Other assets | 405,923 | 383,615 | |||||||||||||||||||
| Total average assets | $ | 4,823,601 | $ | 4,021,811 | |||||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||
| Interest-bearing deposits | $ | 2,924,433 | $ | 24,923 | 1.14 | % | $ | 2,382,864 | $ | 11,814 | 0.66 | % | |||||||||
| Borrowings | 462,575 | 8,391 | 2.43 | % | 504,349 | 8,127 | 2.15 | % | |||||||||||||
| Subordinated debentures | 48,666 | 2,348 | 6.45 | % | 36,524 | 1,764 | 6.46 | % | |||||||||||||
| Total interest-bearing liabilities | 3,435,674 | 35,662 | 1.39 | % | 2,923,737 | 21,705 | 0.99 | % | |||||||||||||
| Non-interest-bearing liabilities | |||||||||||||||||||||
| Demand deposits | 760,717 | 613,866 | |||||||||||||||||||
| Accrued interest payable and other liabilities | 37,444 | 16,341 | |||||||||||||||||||
| Stockholders' equity | 589,766 | 467,867 | |||||||||||||||||||
| Total average liabilities and stockholders' equity | $ | 4,823,601 | $ | 4,021,811 | |||||||||||||||||
| Net interest income/spread | $ | 119,272 | 3.42 | % | $ | 100,733 | 3.55 | % | |||||||||||||
| Net interest income as a percentage of average interest-earning assets(1) | 3.72 | % | 3.74 | % | |||||||||||||||||
| (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)
| September 30 | December 31 | |||||
| 2019 | 2018 | |||||
| (Unaudited) | ||||||
| Assets | ||||||
| Cash and due from banks | $ | 91,279 | $ | 58,492 | ||
| Interest-earning time deposits | 8,455 | 15,744 | ||||
| Investment securities, available for sale | 767,230 | 600,348 | ||||
| Investment securities, held to maturity (fair value of $217,718 and $208,273) | 210,306 | 210,112 | ||||
| Loans held for sale | 1,060 | 1,038 | ||||
| Loans, net of allowance for loan losses of $17,956 and $17,820 | 3,648,669 | 2,995,512 | ||||
| Premises and equipment, net | 92,800 | 74,331 | ||||
| Federal Home Loan Bank stock | 22,447 | 18,073 | ||||
| Goodwill | 151,238 | 119,880 | ||||
| Other intangible assets | 27,658 | 10,390 | ||||
| Interest receivable | 18,282 | 14,239 | ||||
| Cash value of life insurance | 95,011 | 88,062 | ||||
| Other assets | 52,279 | 40,467 | ||||
| Total assets | $ | 5,186,714 | $ | 4,246,688 | ||
| Liabilities | ||||||
| Deposits | ||||||
| Non-interest bearing | $ | 756,707 | $ | 642,129 | ||
| Interest bearing | 3,159,250 | 2,497,247 | ||||
| Total deposits | 3,915,957 | 3,139,376 | ||||
| Borrowings | 516,591 | 550,384 | ||||
| Subordinated debentures | 56,250 | 37,837 | ||||
| Interest payable | 2,725 | 2,031 | ||||
| Other liabilities | 52,480 | 25,068 | ||||
| Total liabilities | 4,544,003 | 3,754,696 | ||||
| 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 44,994,090 and 38,400,476 shares (1), Outstanding 44,969,021 and 38,375,407 shares (1) | - | - | ||||
| Additional paid-in capital | 379,448 | 276,101 | ||||
| Retained earnings | 256,617 | 224,035 | ||||
| Accumulated other comprehensive income (loss) | 6,646 | (8,144 | ) | |||
| Total stockholders' equity | 642,711 | 491,992 | ||||
| Total liabilities and stockholders' equity | $ | 5,186,714 | $ | 4,246,688 | ||
| (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 | Nine Months Ended | ||||||||||||||
| September 30 | September 30 | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Interest Income | |||||||||||||||
| Loans receivable | $ | 49,455 | $ | 37,522 | $ | 136,862 | $ | 108,961 | |||||||
| Investment securities | |||||||||||||||
| Taxable | 3,157 | 2,739 | 9,552 | 7,732 | |||||||||||
| Tax exempt | 3,099 | 2,010 | 8,520 | 5,745 | |||||||||||
| Total interest income | 55,711 | 42,271 | 154,934 | 122,438 | |||||||||||
| Interest Expense | |||||||||||||||
| Deposits | 9,109 | 5,023 | 24,923 | 11,814 | |||||||||||
| Borrowed funds | 2,275 | 2,876 | 8,391 | 8,127 | |||||||||||
| Subordinated debentures | 864 | 600 | 2,348 | 1,764 | |||||||||||
| Total interest expense | 12,248 | 8,499 | 35,662 | 21,705 | |||||||||||
| Net Interest Income | 43,463 | 33,772 | 119,272 | 100,733 | |||||||||||
| Provision for loan losses | 376 | 1,176 | 1,636 | 2,378 | |||||||||||
| Net Interest Income after Provision for Loan Losses | 43,087 | 32,596 | 117,636 | 98,355 | |||||||||||
| Non-interest Income | |||||||||||||||
| Service charges on deposit accounts | 2,836 | 2,009 | 7,193 | 5,804 | |||||||||||
| Wire transfer fees | 189 | 160 | 474 | 490 | |||||||||||
| Interchange fees | 2,138 | 1,410 | 5,659 | 4,293 | |||||||||||
| Fiduciary activities | 1,834 | 1,855 | 5,986 | 5,598 | |||||||||||
| Gains (losses) on sale of investment securities (includes $0 and $(122) | |||||||||||||||
| for the three months ended September 30, 2019 and 2018, respectively, and $(85) and $(111) for the nine months ended September 30, 2019 and nine months ended September 30, 2018 related to accumulated other comprehensive earnings reclassifications) | - | (122 | ) | (85 | ) | (111 | ) | ||||||||
| Gain on sale of mortgage loans | 2,702 | 1,839 | 6,089 | 5,158 | |||||||||||
| Mortgage servicing income net of impairment | 444 | 563 | 1,620 | 1,423 | |||||||||||
| Increase in cash value of bank owned life insurance | 556 | 503 | 1,624 | 1,380 | |||||||||||
| Death benefit on bank owned life insurance | 213 | - | 580 | 154 | |||||||||||
| Other income | 602 | 469 | 1,984 | 1,747 | |||||||||||
| Total non-interest income | 11,514 | 8,686 | 31,124 | 25,936 | |||||||||||
| Non-interest Expense | |||||||||||||||
| Salaries and employee benefits | 16,948 | 14,343 | 48,365 | 42,525 | |||||||||||
| Net occupancy expenses | 3,131 | 2,495 | 9,051 | 7,981 | |||||||||||
| Data processing | 2,140 | 1,759 | 6,245 | 5,062 | |||||||||||
| Professional fees | 335 | 437 | 1,426 | 1,314 | |||||||||||
| Outside services and consultants | 1,552 | 1,204 | 6,737 | 3,735 | |||||||||||
| Loan expense | 2,198 | 1,722 | 6,195 | 4,504 | |||||||||||
| FDIC insurance expense | (273 | ) | 396 | 252 | 1,051 | ||||||||||
| Other losses | 90 | 161 | 363 | 576 | |||||||||||
| Other expense | 3,939 | 3,103 | 12,748 | 9,651 | |||||||||||
| Total non-interest expense | 30,060 | 25,620 | 91,382 | 76,399 | |||||||||||
| Income Before Income Taxes | 24,541 | 15,662 | 57,378 | 47,892 | |||||||||||
| Income tax expense (includes $0 and $(25) for the three months ended | |||||||||||||||
| September 30, 2019 and 2018, respectively, and $(18) and $(23) for the nine months ended September 30, 2019 and nine months ended September 30, 2018 related to income tax expense (benefit) from reclassification items) | 4,004 | 2,597 | 9,383 | 7,908 | |||||||||||
| Net Income | $ | 20,537 | $ | 13,065 | $ | 47,995 | $ | 39,984 | |||||||
| Basic Earnings Per Share (1) | $ | 0.46 | $ | 0.34 | $ | 1.12 | $ | 1.04 | |||||||
| Diluted Earnings Per Share (1) | 0.46 | 0.34 | 1.11 | 1.04 | |||||||||||
| (1) Adjusted for 3:2 stock split on June 15, 2018 | |||||||||||||||