BELLINGHAM, Wash., Jan. 29, 2009 (GLOBE NEWSWIRE) -- Horizon Financial Corp. (Nasdaq:HRZB) the bank holding company for Horizon Bank ("Bank"), today reported that as a result of a $10.0 million provision for loan losses, it had a net loss of $5.1 million, or $0.43 per share, for the fiscal third quarter ended December 31, 2008, compared to a net loss of $4.6 million, or $0.39 per share in the immediate prior quarter ended September 30, 2008, and net income of $4.7 million, or $0.39 per diluted share, for the fiscal third quarter ended December 31, 2007. For the first nine months of fiscal 2009, following $25.0 million in provisions for loan losses, net loss totaled $7.7 million, or $0.65 per share, compared to earnings of $14.6 million, or $1.19 per diluted share for the first nine months of fiscal 2008.
"In our third fiscal quarter, we continued to systematically diversify our assets, build liquidity and de-leverage our balance sheet," said Rich Jacobson, Horizon's Chief Executive Officer. "As we work through the completion and sale of properties in our construction portfolio, we continue to see the decline in the regional housing market impact valuations and the volume of sales. We continue to work on the diversification of our loan portfolio with construction and development loan balances declining $52 million from September 30, 2008. Despite the challenging market, we've seen success in implementing our strategy to diversify the Bank's loan mix, with commercial business loans increasing to $209.1 million at December 31, 2008, compared to $168.1 million one year earlier."
"Our non-performing assets increased in the quarter, with non-performing loans declining slightly and a significant increase in real estate owned," said Dennis Joines, the Bank's President and Chief Operating Officer. The $10.0 million provision booked in the quarter corresponded closely with the $10.3 million in net charge offs. With the de-leveraging of the balance sheet, loan loss reserves increased as a percentage of net loans to 2.13%.
The Puget Sound economy continues to follow the national trends with falling employment and lower home sales and prices. Nationally, 1.2 million jobs have been lost, or 0.9% of the nation's total employment between August and November, while the Puget Sound region lost 14,300 jobs, or 0.8% of its total employment during the same time period.
Conference Call Information
Management will host a conference call today, January 29, 2009, at 2:00 pm PST (5:00 pm EST) to discuss the third quarter and fiscal 2009 year-to-date results. The live call can be accessed by dialing (303) 262-2200 or on the web at www.horizonbank.com. The replay, which will be available for a month beginning shortly after the call concludes, can be heard at (303) 590-3000 using access code 11125651# or on the web at www.horizonbank.com.
Capital Ratios, Liquidity and Credit Quality
"This quarter, we chose to suspend the quarterly cash dividend on our common stock in order to preserve capital in these challenging economic times," Jacobson said. "We also filed a shelf registration to keep our options open in the event a strategic opportunity is appropriate to raise capital." Horizon Bank remains well capitalized by regulatory standards at December 31, 2008, with the leverage ratio at 8.00%, Tier 1 capital to risk adjusted assets of 8.99% and total risk-based capital of 10.27%.
"We are also using our liquidity tools with a sound mix of funding sources, including growth in core deposits, our investment portfolio, and our line of credit at the Federal Home Loan Bank. The extension of FDIC insurance to all non-interest bearing deposits and the increased limit to $250,000 from $100,000 per account continues to maintain consumer confidence in the national banking system and our ability to build core deposits," said Joines.
Total non-performing assets were $83.7 million, or 5.69% of total assets at December 31, 2008, up from $80.2 million, or 5.53% of total assets at September 30, 2008, and $1.6 million, or 0.12% of total assets at December 31, 2007. Non-performing loans decreased to $66.9 million, or 5.52% of gross loans at December 31, 2008, from $78.4 million, or 6.19% of gross loans at September 30, 2008, and $990,000, at December 31, 2007. The decline in non-performing loans at December 31, 2008, is primarily a result of collection efforts, net charge offs and foreclosures which increased real estate owned to $16.8 million.
The allowance for loan losses was $25.3 million, or 2.13% of net loans at December 31, 2008, compared to $25.6 million, or 2.06% of net loans at September 30, 2008, and $17.9 million, or 1.50% of net loans a year ago. Net charge-offs were $10.3 million in the quarter and $18.8 million in the first nine months of fiscal 2009.
The following table breaks out the non-performing assets by category and geography at December 31, 2008:
Non-performing Assets Whatcom Skagit Snohomish King
1-4 Family residential $ 75 $ -- $ 1,289 $ --
1-4 Family construction -- -- 768 --
----------------------------------------
Subtotal 75 -- 2,057 --
Commercial land development 8,780 -- 16,816 --
Commercial construction 221 11,622 13,656
Multi family residential -- -- --
Commercial real estate -- 5,628 --
Commercial loans -- -- 500 --
Home equity secured 100 15 --
Other consumer loans -- -- --
----------------------------------------
Subtotal 8,880 5,864 28,938 13,656
Total nonperforming
assets $ 8,955 $ 5,864 $30,995 $13,656
========================================
Kitsap Pierce Thurston Total
1-4 Family residential $ -- $ -- $ -- $ 1,364
1-4 Family construction 580 2,037 -- 3,385
----------------------------------------
Subtotal 580 2,037 -- 4,749
Commercial land development -- 5,667 2,286 33,549
Commercial construction -- 13,214 468 39,181
Multi family residential -- -- -- --
Commercial real estate -- -- -- 5,628
Commercial loans -- -- -- 500
Home equity secured -- -- -- 115
Other consumer loans -- -- -- --
Subtotal -- 18,881 2,754 78,973
----------------------------------------
Total nonperforming assets $ 580 $20,918 $ 2,754 $83,722
========================================
Balance Sheet Review
Total assets were $1.47 billion at December 31, 2008, compared to $1.45 billion at September 30, 2008, and $1.39 billion at December 31, 2007. Net loans declined 4% to $1.19 billion at December 31, 2008, compared to $1.24 billion at September 30, 2008, and $1.19 billion at December 31, 2007. Commercial real estate loans, including commercial construction and land development, continue to make up the majority of the portfolio representing 64% of net loans at December 31, 2008, down from 67% last quarter and 69% a year ago. Commercial business loans represent 17%, residential loans represent 13%, and consumer loans represent 6% of net loans, at the end of the fiscal third quarter. "We are focusing on providing excellent service to our existing customer base, and we have been very selective in pursuing new relationships in this current environment when we are working to improve asset quality and complete the balance sheet de-leveraging that is necessary to return to an appropriate balance between growth and profitability," noted Jacobson.
The investment and mortgage-backed securities portfolio totaled $68.4 million at December 31, 2008. "We recognized a write-down of $309,000 as a result of "other than temporary impairment" on private mortgage-backed securities we received from the in-kind distribution of the Shay AMF family of mutual funds. The market valuation for these securities continues to be low and the trading in these securities is limited," said Greg Spear, Horizon's Chief Financial Officer.
Total deposits increased 18% year over year to $1.20 billion at December 31, 2008, compared to $1.15 billion at September 30, 2008, and $1.01 billion at December 31, 2007. Core deposits, including transaction accounts and certificates of deposit under $100,000, increased 2% year over year and 4% from the prior quarter. Core deposits make up 55% of total deposits. In addition to higher FDIC insurance limits and the unlimited insurance for all non-interest bearing transaction accounts, the Bank participates in the Certificate of Deposit Account Registry Service ("CDARS") which is a deposit matching program to match CDARS deposits in other participating banks. Included in the brokered CD totals were $11.3 million in CDARS deposits, which shifted from the Bank's retail deposit products as customers sought to maximize FDIC insurance. Jumbo CDs totaled $290.2 million, or 24% of deposits, down from 25% of deposits in the fiscal second quarter and 27% a year ago. Brokered CDs totaled $250.7 million compared to $235.5 million in the prior quarter and $97.9 million a year ago. "We continue to use brokered CDs to replace other borrowing as part of our liquidity management, because the rates are favorable and the call features contained in many of these instruments provide us with the flexibility to divest or reprice these deposits when the time is appropriate," said Spear.
During the quarter ended December 31, 2008, the Bank performed an impairment assessment of its goodwill and charged off its entire goodwill asset, increasing "Other Expenses" for the quarter by $545,000 on a pretax basis.
Shareholders' equity was $118.3 million at December 31, 2008, compared to $122.2 million at September 30, 2008, and $127.9 million at December 31, 2007. At December 31, 2008, Horizon's book value was $9.88 per share, compared to $10.21 per share at September 30, 2008, and $10.66 per share a year earlier, and its tangible book value was $9.86 per share compared to $10.15 per share at September 30, 2008, and $10.60 per share a year ago.
Review of Operations
Net revenue (net interest income plus non-interest income) was $10.3 million in the third quarter of fiscal 2009 compared to $15.3 million for the comparable quarter in fiscal 2008. Net interest income declined 33% to $9.3 million in the current quarter compared to $13.8 million for the year ago quarter. Contributing to this decline was the lower yield on earning assets, which was primarily a result of the declining yields on the portion of the Bank's portfolio which is tied to the prime rate; however, this was offset partially by a lower cost of interest bearing liabilities. Total interest expense declined 18% in the current quarter to $9.9 million, from $12.1 million for the fiscal third quarter a year ago. Year-to-date, net revenues were $36.2 million compared to $46.0 million in the first nine months of fiscal 2008, representing a decline of $9.5 million or 20.7%.
The provision for loan losses was $10.0 million in the third quarter of fiscal 2009, $12.0 million in the immediate prior quarter and $900,000 in the third quarter of fiscal 2008. In the fiscal year to date period, the provision for loan losses was $25.0 million compared to $2.1 million a year ago.
Non-interest income was $1.0 million in the third quarter of fiscal 2009, compared to $1.5 million in the third quarter of fiscal 2008. Year-to-date, non-interest income was $4.7 million compared to $4.8 million in the first nine months of fiscal 2008.
Non-interest expense increased 12% to $8.3 million in the third quarter of fiscal 2009, from $7.4 million in the third quarter of fiscal 2008. The increase reflects higher costs for managing the other real estate owned portfolio, FDIC insurance premiums, the charge-off of the goodwill asset and increased legal and accounting fees. The reduction in force completed in the quarter helped control compensation costs which dropped 5% from the prior quarter and 2% year to date. "During the third fiscal quarter, we announced that we will be consolidating our Alabama Street office into our nearby Barkley Boulevard office, bringing the total number of offices in the city of Bellingham to four," said Jacobson. The efficiency ratio was 81.08% for the quarter ended December 31, 2008, compared to 65.43% for the quarter ended September 30, 2008, and 48.46% for prior year quarter. Despite the efforts to reduce compensation and related costs, our efficiency ratio was adversely impacted by a combination of factors during the period, including the costs mentioned above, the decrease in the prime rate as well as an increase in nonaccrual interest reversals.
The net interest margin was 2.77% in the third quarter of fiscal 2009, a decrease of 49 basis points from 3.26% in the immediate prior quarter and down 163 basis points from 4.40% in the same period a year ago. Year-to-date, the net interest margin was 3.14%, down 140 basis points from 4.54% in the first nine months of fiscal 2008. The reversal of interest for non-accrual loans accounted for 31 basis points of the decline in the third quarter of fiscal 2009 and 39 basis points year to date. In addition, with approximately 35% of the loan portfolio tied to the prime rate (and not subject to floors), the recent prime rate reductions resulted in yields on the loan portfolio shifting much more quickly than those on deposits.
The yield on earning assets was 5.73% in the third quarter of fiscal 2009, a decrease from 6.20% in the preceding quarter and 8.26% in the third quarter of fiscal 2008 as a result of declining interest rates and higher than normal non-performing assets. In the third quarter of fiscal 2009, the cost of interest-bearing liabilities was 3.02%, compared to 3.00% in the preceding quarter and 4.00% for third quarter of fiscal 2008. In the first nine months of fiscal 2009, the yield on earning assets was 6.14% down from 8.46% in the same period a year ago and the cost of interest bearing liabilities was 3.07% down from 4.05% a year ago.
Horizon Financial Corp. is a $1.47 billion, state-chartered bank holding company headquartered in Bellingham, Washington. Its primary subsidiary, Horizon Bank, is a regional presence that has been serving customers for 87 years, and operates 19 full-service offices, four commercial loan centers and four real estate loan centers throughout Whatcom, Skagit, Snohomish and Pierce counties, Washington.
Economic data was derived from reports by the Washington State Employment Security Department, Labor Market and Economic Analysis at www.workforceexplorer.com, the Economic Forecaster at www.economicforecaster.com, Marple's Pacific Northwest Letter at www.marples.com, and other real estate data at www.wcrer.wsu.edu and http://www.nwrealestate.com/nwrpub/common/news.cfm.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited) Quarter Quarter Quarter
(in 000s, Ended Three Ended One Ended
except share Dec 31, Month Sept 30, Year Dec 31,
data) 2008 Change 2008 Change 2007
---------------------------------------------------------------------
Interest income:
Interest on
loans $ 18,363 -7% $ 19,808 -26% $ 24,917
Interest and
dividends on
securities 862 -9% 949 -13% 992
----------- ----------- -----------
Total
interest
income 19,225 -7% 20,757 -26% 25,909
Interest
expense:
Interest on
deposits 8,927 5% 8,500 -7% 9,573
Interest on
borrowings 1,019 -24% 1,334 -60% 2,536
----------- ----------- -----------
Total
interest
expense 9,946 1% 9,834 -18% 12,109
----------- ----------- -----------
Net interest
income 9,279 -15% 10,923 -33% 13,800
Provision for
loan losses 10,000 -17% 12,000 1011% 900
----------- ----------- -----------
Net interest
income
(loss) after
provision
for loan
losses (721) -33% (1,077) -106% 12,900
Non-interest
income:
Service fees 747 -9% 819 -16% 893
Net gain on
sales of
loans -
servicing
released 81 -45% 146 -52% 170
Net gain
(loss) on
sales of
loans -
servicing
retained -- -100% (2) -100% 1
Net loss on
investment
securities (302) -61% (777) N/A --
Other 451 -65% 1,291 0% 452
----------- ----------- -----------
Total
non-interest
income 977 -34% 1,477 -36% 1,516
Non-interest
expense:
Compensation
and employee
benefits 4,103 -5% 4,337 -2% 4,205
Building
occupancy 1,180 0% 1,175 -4% 1,232
Other
noninterest
expenses 1,921 39% 1,387 33% 1,447
REO/collection
expense 488 -10% 541 526% 78
FDIC insurance 228 7% 214 686% 29
Data processing 243 1% 241 4% 234
Advertising 152 -31% 219 -23% 197
----------- ----------- -----------
Total
non-interest
expense 8,315 2% 8,114 12% 7,422
Income (loss)
before provision
for income taxes (8,059) N/A (7,714) N/A 6,994
Provision
(Benefit) for
income taxes (2,939) N/A (3,109) N/A 2,282
----------- ----------- -----------
Net Income
(Loss) $ (5,120) N/A $ (4,605) N/A $ 4,712
=========== =========== ===========
Earnings per
share :
Basic earnings
(loss) per
share $ (0.43) N/A $ (0.39) N/A $ 0.39
Diluted
earnings
(loss) per
share N/A N/A N/A N/A $ 0.39
Weighted average
shares
outstanding:
Basic 11,970,478 0% 11,940,064 -1% 12,064,265
Common stock
equivalents 22,838 -29% 32,190 -75% 93,200
----------- ----------- -----------
Diluted 11,993,316 0% 11,972,254 -1% 12,157,465
=========== =========== ===========
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Nine Months
Ended Ended
(unaudited) (in 000s, Dec 31, Dec 31,
except per share data) 2008 Change 2007
---------------------------------------------------------------------
Interest income:
Interest on loans $ 58,617 -20% $ 73,683
Interest and dividends on
securities 2,772 -8% 3,017
----------- -----------
Total interest income 61,389 -20% 76,700
Interest expense:
Interest on deposits 26,013 -10% 28,858
Interest on borrowings 3,947 -41% 6,658
----------- -----------
Total interest expense 29,960 -16% 35,516
----------- -----------
Net interest income 31,429 -24% 41,184
Provision for loan losses 25,000 1090% 2,100
----------- -----------
Net interest income after
provision for loan losses 6,429 -84% 39,084
Non-interest income:
Service fees 2,526 -6% 2,692
Net gain on sales of loans -
servicing released 431 -34% 657
Net gain (loss) on sales of loans -
servicing retained (2) N/A 18
Net loss on investment securities (500) N/A --
Other 2,258 54% 1,463
----------- -----------
Total non-interest income 4,713 -2% 4,830
Non-interest expense:
Compensation and employee benefits 12,943 2% 12,632
Building occupancy 3,482 0% 3,493
Other noninterest expenses 4,652 4% 4,473
REO/collection expense 1,133 836% 121
FDIC insurance 487 473% 85
Data processing 728 2% 713
Advertising 589 -4% 612
----------- -----------
Total non-interest expense 24,014 9% 22,129
Income (loss) before provision for
income taxes (12,872) N/A 21,785
Provision (Benefit) for income taxes (5,167) N/A 7,144
----------- -----------
Net Income (Loss) $ (7,705) N/A $ 14,641
=========== ===========
Earnings per share :
Basic earnings (loss) per share $ (0.65) N/A $ 1.21
Diluted earnings (loss) per share N/A N/A $ 1.19
Weighted average shares outstanding:
Basic 11,934,934 -2% 12,148,772
Common stock equivalents 44,600 -57% 103,548
----------- -----------
Diluted 11,979,534 -2% 12,252,320
=========== ===========
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
(in 000s, Three One
except share Dec 31, Month Sept 30, Year Dec 31,
data) 2008 Change 2008 Change 2007
---------------------------------------------------------------------
Assets:
Cash and due
from banks $ 23,391 6% $ 22,117 -6% $ 24,807
Interest-
bearing
deposits 80,869 330% 18,816 2804% 2,785
Investment
securities -
available
for sale 28,425 -12% 32,183 -41% 47,981
Mortgage-backed
securities -
available
for sale 39,954 1% 39,503 23% 32,404
Mortgage-backed
securities -
held to
maturity 9 -10% 10 -81% 47
Federal Home
Loan Bank
stock 7,247 -16% 8,580 0% 7,247
Loans held
for sale 2,072 39% 1,496 -19% 2,561
Gross loans
receivable 1,212,479 -4% 1,265,275 0% 1,208,529
Reserve for
loan losses (25,309) -1% (25,579) 41% (17,891)
----------- ----------- -----------
Net loans
receivable 1,187,170 -4% 1,239,696 0% 1,190,638
Investment in
real estate
in a joint
venture 17,879 1% 17,742 2% 17,475
Accrued
interest and
dividends
receivable 6,598 -5% 6,942 -16% 7,881
Property and
equipment, net 26,691 -2% 27,142 -5% 28,127
Net deferred
income tax
assets 6,698 -8% 7,304 54% 4,351
Income tax
receivable 5,694 39% 4,111 345% 1,279
Other real
estate owned 16,791 803% 1,859 2464% 655
Other assets 22,824 -4% 23,798 -1% 23,077
----------- ----------- -----------
Total
assets $ 1,472,312 1% $ 1,451,299 6% $ 1,391,315
=========== =========== ===========
Liabilities:
Deposits $ 1,195,424 4% $ 1,147,278 18% $ 1,009,940
Other borrowed
funds 128,968 -15% 151,571 -42% 222,555
Borrowing
related to
investment in
real estate
in a joint
venture 23,942 2% 23,404 9% 21,947
Accounts
payable and
other
liabilities 3,625 -22% 4,618 -46% 6,757
Advances by
borrowers for
taxes and
insurance 195 -48% 372 -9% 215
Deferred
compensation 1,837 -4% 1,905 -6% 1,963
----------- ----------- -----------
Total
liabil-
ities $ 1,353,991 2% $ 1,329,148 7% $ 1,263,377
Stockholders'
equity:
Serial
preferred
stock, $1.00
par value;
10,000,000
shares
authorized;
none issued
or outstanding -- -- --
Common stock,
$1.00 par
value;
30,000,000
shares
authorized;
11,976,669,
11,960,371, and
11,998,978
shares
outstanding $ 11,977 0% $ 11,960 0% $ 11,999
Additional
paid-in
capital 51,210 0% 51,086 1% 50,839
Retained
earnings 53,994 -9% 59,115 -14% 62,709
Accumulated
other
comprehensive
income (loss) 1,140 NA (10) -52% 2,391
----------- ----------- -----------
Total
stockholders'
equity 118,321 -3% 122,151 -8% 127,938
----------- ----------- -----------
Total
liabilities
and
stockholders'
equity $ 1,472,312 1% $ 1,451,299 6% $ 1,391,315
=========== =========== ===========
Intangible
assets:
Goodwill $ -- -100% $ 545 -100% $ 545
Mortgage
servicing
asset 229 -3% 235 1% 227
----------- ----------- -----------
Total
intangible
assets $ 229 -71% $ 780 -70% $ 772
=========== =========== ===========
LOANS
(unaudited)
(in 000s) Dec 31, 2008 Sept 30, 2008 Dec 31, 2007
---------------------------------------------------------------------
1-4 Mortgage
1-4 Family
residential $ 167,737 $ 157,502 $ 164,933
1-4 Family
construction 35,500 37,877 36,594
Participations
sold (48,943) (50,198) (49,105)
---------- ----------- ----------
Subtotal 154,294 145,181 152,422
Commercial land
development 201,683 200,308 183,286
Commercial
construction 263,113 317,066 294,612
Multi family
residential 42,722 44,522 45,415
Commercial real
estate 273,906 286,728 312,669
Commercial loans 209,072 207,348 168,120
Home equity
secured 59,538 56,047 44,267
Other consumer
loans 8,151 8,075 7,738
---------- ----------- ----------
Subtotal 1,058,185 1,120,094 1,056,107
---------- ----------- ----------
Subtotal 1,212,479 1,265,275 1,208,529
Less:
Reserve for
loan losses (25,309) (25,579) (17,891)
---------- ----------- ----------
Net loans
receivable $1,187,170 $ 1,239,696 $1,190,638
========== =========== ==========
Net residential
loans $ 152,502 13% $ 143,555 12% $ 151,151 13%
Net commercial
loans 203,760 17% 202,271 16% 165,077 14%
Net commercial
real estate
loans 764,714 64% 831,123 67% 823,257 69%
Net consumer
loans 66,194 6% 62,747 5% 51,153 4%
--------------- ---------------- ---------------
$1,187,170 100% $ 1,239,696 100% $1,190,638 100%
=============== ================ ===============
DEPOSITS
(unaudited)
(in 000s) Dec 31, 2008 Sept 30, 2008 Dec 31, 2007
---------------------------------------------------------------------
Core Deposits
Savings $ 17,677 1% $ 18,135 2% $ 18,880 2%
Checking 76,626 6% 75,633 6% 71,300 7%
Checking - non
interest
bearing 90,376 8% 65,365 6% 81,747 8%
Money market 154,021 13% 179,714 16% 186,402 18%
Certificates
of Deposit
under $100,000 315,827 27% 289,945 25% 280,276 28%
--------------- ---------------- ---------------
Subtotal 654,527 55% 628,792 55% 638,605 63%
Other Deposits
Certificates
of Deposit
$100,000 and
above 290,227 24% 283,015 25% 273,437 27%
Brokered
Certificates
of Deposit 239,353 20% 209,762 18% 97,898 10%
CDARS Deposits 11,317 1% 25,709 2% -- 0%
--------------- ---------------- ---------------
Total Other
Deposits 540,897 45% 518,486 45% 371,335 37%
--------------- ---------------- ---------------
Total $1,195,424 100% $ 1,147,278 100% $1,009,940 100%
=============== ================ ===============
WEIGHTED AVERAGE INTEREST RATES:
Nine Nine
Quarter Quarter Quarter Months Months
Ended Ended Ended Ended Ended
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
(unaudited) 2008 2008 2007 2008 2007
--------------------------------------------------------------------
Yield on loans 5.97% 6.36% 8.55% 6.32% 8.78%
Yield on investments 3.08% 4.05% 4.47% 3.76% 4.47%
---- ---- ---- ---- ----
Yield on interest-
earning assets 5.73% 6.20% 8.26% 6.14% 8.46%
Cost of deposits 3.07% 3.04% 3.88% 3.12% 3.91%
Cost of borrowings 2.66% 2.80% 4.52% 2.79% 4.77%
---- ---- ---- ---- ----
Cost of interest-
bearing
liabilities 3.02% 3.00% 4.00% 3.07% 4.05%
AVERAGE BALANCES
Quarter Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended Ended
(unaudited) Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
(in 000s) 2008 2008 2007 2008 2007
---------------------------------------------------------------------
Loans $1,229,327 $1,246,410 $1,165,555 $1,235,843 $1,118,727
Investments 111,800 93,757 88,687 98,192 90,053
---------- ---------- ---------- ---------- ----------
Total
interest-
earning
assets 1,341,127 1,340,167 1,254,242 1,334,035 1,208,780
Deposits 1,163,647 1,118,799 987,250 1,112,868 983,495
Borrowings 153,579 190,443 224,558 188,831 186,038
---------- ---------- ---------- ---------- ----------
Total
interest-
bearing
liabili-
ties $1,317,226 $1,309,242 $1,211,808 1,301,699 1,169,533
Average
assets $1,461,806 $1,449,475 $1,368,723 $1,440,860 $1,327,829
Average
stockholders'
equity $ 120,236 $ 124,790 $ 128,002 $ 124,055 $ 126,373
CONSOLIDATED FINANCIAL RATIOS
Quarter Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended Ended
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
(unaudited) 2008 2008 2007 2008 2007
---------------------------------------------------------------------
Return on
average
assets -1.40% -1.27% 1.38% -0.71% 1.47%
Return on
average
equity -17.03% -14.76% 14.72% -8.28% 15.45%
Efficiency
ratio 81.08% 65.43% 48.46% 66.44% 48.09%
Net interest
spread 2.71% 3.19% 4.27% 3.07% 4.41%
Net interest
margin 2.77% 3.26% 4.40% 3.14% 4.54%
Equity-to-
assets
ratio 8.04% 8.42% 9.20%
Book value
per share $ 9.88 $ 10.21 $ 10.66
Tangible
book value
per share $ 9.86 $ 10.15 $ 10.60
RESERVE FOR LOAN LOSSES
Quarter Quarter Quarter Nine Months Nine Months
(unaudited) Ended Ended Ended Ended Ended
(dollars Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
(in 000s) 2008 2008 2007 2008 2007
---------------------------------------------------------------------
Balance at
beginning
of period $ 25,579 $ 19,149 $ 17,023 $ 19,114 $ 15,889
Provision
for loan
losses 10,000 12,000 900 25,000 2,100
Charge offs
- net of
recoveries (10,270) (5,570) (32) (18,805) (98)
---------- ---------- ---------- ---------- ----------
Balance at
end of
period $ 25,309 $ 25,579 $ 17,891 $ 25,309 $ 17,891
Reserves/
Gross Loans
Receivable 2.09% 2.02% 1.48%
Reserves/Net
Loans
Receivable 2.13% 2.06% 1.50%
NON-PERFORMING ASSETS
(unaudited)
(dollars Dec 31, Sept 30, Dec 31,
in 000s) 2008 2008 2007
---------------------------------------------
Accruing
loans -
90 days
past due $ 5,643 $ 589 $ --
Non-accrual
loans 61,288 77,781 990
---------- ---------- ----------
Total non-
performing
loans $ 66,931 $ 78,370 $ 990
Total non-
performing
loans/gross
loans 5.52% 6.19% 0.08%
Real estate
owned $ 16,791 $ 1,859 $ 655
---------- ---------- ----------
Total non-
performing
assets $ 83,722 $ 80,229 $ 1,645
Total non-
performing
assets/
total
assets 5.69% 5.53% 0.12%
Safe Harbor Statement: Except for the historical information in this news release, the matters described herein are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs, results of examinations by our banking regulators, our ability to increase our capital and manage our liquidity, our ability to manage loan delinquency rates, the ability to successfully expand existing relationships, deposit pricing and the ability to gather low-cost deposits, success in new markets and expansion plans, expense management and the efficiency ratio, expanding or maintaining the net interest margin, interest rate risk, the local and national economic environment, and other risks and uncertainties discussed from time to time in Horizon Financial's filings with the Securities and Exchange Commission ("SEC"). Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this release. Horizon undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Investors are encouraged to read the SEC report of Horizon, particularly its Form 10-K for the fiscal year ended March 31, 2008 and its Form 10-Q filings for the quarters ended June 30, 2008 and September 30, 2008 for meaningful cautionary language discussion why actual results may vary from those anticipated by management.