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.