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Horizon Bank

Horizon Bancorp Announces 2014 Earnings

January 22, 2015 04:34 PM
 

Michigan City, Indiana (NASDAQ GM: HBNC) – Horizon Bancorp today announced its unaudited financial results for the three and twelve-month periods ended December 31, 2014.

SUMMARY:

  • Assets surpassed $2.0 billion during 2014, ending the year at $2.1 billion as of December 31, 2014.
  • Net income for the year ending December 31, 2014 was $18.1 million or $1.90 diluted earnings per share.
  • Fourth quarter 2014 net income was $4.9 million or $.51 diluted earnings per share.
  • Total loans, excluding mortgage warehouse loans, increased 28.9% or $281.6 million during the year ended December 31, 2014.
  • The quarterly dividend was increased twice during the year ended December 31, 2014 from 11 cents to 13 cents in the second quarter and to 14 cents in the fourth quarter.
  • Return on average assets was 0.96% for the fourth quarter of 2014 and 0.93% for the year ending December 31, 2014.
  • Return on average common equity was 10.72% for the fourth quarter of 2014 and 10.60% for the year ending December 31, 2014.
  • Non-performing loans to total loans as of December 31, 2014 were 1.62% compared to 1.70% as of December 31, 2013.
  • Substandard loans totaled $27.7 million as of December 31, 2014, a decrease of $7.1 million from $34.7 million as of December 31, 2013.
  • Horizon’s full-service Carmel, Indiana office is expected to open in February of 2015.


Craig M. Dwight, Chairman and CEO, commented: “I am pleased to announce Horizon’s 2014 results, a year in which tremendous progress was made across the company.  Headlining the year is the growth we achieved throughout the loan portfolio and the successful integration of the Summit Community Bank (“Summit”) acquisition in East Lansing, Michigan.  All loan product types experienced significant growth during the year, allowing us to combat industry-wide net interest margin pressure.  Additionally, the increase in assets from both organic loan growth and the Summit acquisition enabled us to spread operating costs across a larger and more diversified revenue stream.”

Dwight continued, “Excluding one-time expenses related to the Summit acquisition, the decrease in income from acquisition-related purchase accounting adjustments and gains on the sale of investment securities, Horizon’s net income and diluted earnings per share increased by 6.4% and 3.0%, respectively, for the year ended December 31, 2014 compared to the previous year.  This increase is a notable accomplishment given the lower mortgage volume and poor weather conditions which decreased net income and earnings per share during the first quarter of 2014.  The increase in core net income and diluted earnings per share illustrate the incremental operating leverage Horizon achieved through our strategic growth initiative.  We believe our investments in technology, new markets, and talented employees have created a solid base to maintain this momentum into 2015.”

“The resiliency of our net interest margin throughout the year illustrates the positive impact our loan growth has made,” Dwight continued.  “Horizon’s core net interest margin, excluding income from acquisition-related purchase accounting adjustments, increased from 3.39% in the fourth quarter of 2013 to 3.48% in the fourth quarter of 2014.  For the year ended December 31, 2014, the net interest margin decreased only 10 basis points to 3.47% in an environment with margin pressure persisting throughout the banking industry.”

Dwight commented on the increase in provision for loan losses in the fourth quarter and for the year ending December 31, 2014 compared to the same periods of the previous year.  “This increase reflects loan growth as well as a loan loss reserve to loan ratio in-line with current credit conditions.  Non-performing loans increased $2.7 million during the fourth quarter; however, total substandard loans decreased by $7.3 million from $35.0 million as of September 30, 2014 to $27.7 million as of December 31, 2014.  The increase in non-performing loans was due to one commercial real estate loan totaling $5.4 million that was moved to non-accrual status during the fourth quarter of 2014. Credit conditions continue to improve across the portfolio.”

Horizon’s loan loss reserve ratio, excluding loans with credit-related purchase accounting adjustments, stood at 1.29% as of December 31, 2014.

Dwight concluded, “Horizon’s four key revenue sources – business banking, retail banking, residential mortgage lending and wealth management – all made positive contributions to our 2014 results.  We remain focused on continuing this trend in 2015 in an effort to increase profitability and build shareholder value.”  

Income Statement Highlights

Net income for the fourth quarter of 2014 was $4.9 million or $.51 diluted earnings per share compared to $4.1 million or $.45 diluted earnings per share in the fourth quarter of 2013.  The increase in net income from the previous year reflects an increase in interest income primarily due to loan growth and an increase in non-interest income due to an increase in gain on sale of loans, interchange fees and fiduciary activities partially offset by an increase in the provision expense.

Net income for the year ended December 31, 2014 was $18.1 million or $1.90 diluted earnings per share compared to $19.9 million or $2.17 diluted earnings per share for the year ended December 31, 2013.  The decrease in net income compared to the previous year was due to $1.3 million in expenses related to the Summit acquisition in 2014 and a decrease of $3.5 million in income from acquisition-related purchase accounting adjustments partially offset by an increase of $614,000 in income from the gain on sale of investment securities.  Excluding these non-core items, net income for the year ending December 31, 2014 increased $998,000 or 6.4% to $16.5 million compared to $15.5 million in the previous year.

Horizon’s net interest margin was 3.64% during the fourth quarter of 2014, up from 3.59% for the prior quarter and 3.60% for same period of 2013.  The increase in net interest margin compared to the prior quarter was due to acquisition-related purchase accounting adjustments and lower funding costs, and the increase compared to the same period of 2013 was primarily due to loan growth.  Excluding purchase accounting adjustments related to the 2012 Heartland Bancshares, Inc. and the 2014 Summit acquisitions, the margin would have been 3.48% for the fourth quarter of 2014 compared to 3.50% for the prior quarter and 3.39% for the same period of the prior year.  Interest income from acquisition-related purchase accounting adjustments was $719,000, $438,000, and $850,000 for the three months ended December 31, 2014, September 30, 2014 and December 31, 2013, respectively.

Horizon’s net interest margin was 3.62% for the year ending December 31, 2014, down from 3.96% for the year ending December 31, 2013.  Excluding interest income from acquisition-related purchase accounting adjustments, the margin would have been 3.47% for the twelve months ending December 31, 2014 compared to 3.57% for same period of 2013. Interest income from acquisition-related purchase accounting adjustments was $2.7 million and $6.3 million for the twelve months ended December 31, 2014 and December 31, 2013, respectively.

Residential mortgage lending activity during the fourth quarter of 2014 generated $2.3 million in income from the gain on sale of mortgage loans, an increase of $1.1 million from the fourth quarter of 2013.  Total origination volume in the fourth quarter of 2014, including loans placed into portfolio, totaled $96.0 million, representing an increase of 36.4% from the fourth quarter of 2013 of $70.4 million.  Purchase money mortgage originations during the fourth quarter of 2014 represented 67.6% of total originations compared to 77.6% of originations during the previous quarter and 75.6% during the fourth quarter of 2013.

Lending Activity

Total loans increased $312.6 million from $1.1 billion as of December 31, 2013 to $1.4 billion as of December 31, 2014 as mortgage warehouse loans increased by $31.0 million, residential mortgage loans increased by $68.7 million and consumer loans increased by $40.9 million.  Commercial loans increased $169.1 million or 33.5% from $505.2 million at December 31, 2013 to $674.3 million at December 31, 2014.  Total loans increased 2.8% in the fourth quarter of 2014 with positive growth contributions from both the residential mortgage and consumer loan portfolios.  Commercial loans decreased 0.4% over the linked quarter due to unanticipated payoffs during the quarter; however, the pipeline going into 2015 remains solid.

Total loan balances in the Kalamazoo and Indianapolis markets continued to grow during 2014 to $142.2 million and $123.4 million, respectively, as of December 31, 2014. Kalamazoo’s aggregate loan balances increased $28.4 million or 24.9%, and Indianapolis’ aggregate loan balances increased $50.8 million or 69.9% compared to December 31, 2013.  

The provision for loan losses was $978,000 for the fourth quarter of 2014 compared to a negative provision of $997,000 for the same period of 2013.  The higher provision for loan losses for the fourth quarter of 2014 compared to the same period of 2013 was due to loan growth as well as a specific reserve of $560,000 placed on one commercial real estate loan that was moved to non-accrual status during the fourth quarter of 2014.  The provision for loan losses was $3.1 million for the year ended December 31, 2014 compared to $1.9 million for the same period of 2013.  The higher provision for loan losses for the year ending December 31, 2014 compared to the same period of 2013 was due to loan growth as well as $1.0 million in charge-off expense related to one commercial credit in the third quarter of 2014 and a specific reserve of $560,000 placed on one commercial real estate loan that was moved to non-accrual status during the fourth quarter of 2014.

The ratio of the allowance for loan losses to total loans decreased to 1.19% as of December 31, 2014 from 1.49% as of December 31, 2013 due to an increase in total loans from both organic growth and the Summit acquisition, partially offset by an increase in the allowance for loan losses from $16.0 million as of December 31, 2013 to $16.5 million as of December 31, 2014.  The ratio of the allowance for loan losses to total loans, excluding loans with credit-related purchase accounting adjustments, was 1.29% as of December 31, 2014.

Non-performing loans totaled $22.4 million as of December 31, 2014, up from $18.3 million as of December 31, 2013.  Compared to December 31, 2013, non-performing commercial loans and consumer loans increased by $4.4 million and $32,000, respectively, partially offset by a decrease of $252,000 in non-performing real estate loans.  The increase in non-performing commercial loans was due to the Summit acquisition as well as a commercial real estate loan totaling $5.4 million that was moved to non-accrual status in the fourth quarter of 2014.  As a percentage of total loans, non-performing loans were 1.62% at December 31, 2014, down 8 basis points from 1.70% at December 31, 2013.  At December 31, 2014, loans acquired in the Summit acquisition represented $1.2 million in non-performing, $2.3 million in substandard and $173,000 in delinquent loans.

Expense Management

Total non-interest expense was $3.5 million higher in 2014 compared to 2013 and $62,000 lower in the fourth quarter of 2014 compared to the fourth quarter of 2013.  The increase in 2014 compared to the previous year was primarily due to an increase in salaries, occupancy, data processing and outside services and consultant costs.  In addition, some of the increase in 2014 compared to 2013 was related to the Summit acquisition.

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 of the net interest margin excluding the impact of acquisition-related purchase accounting adjustments and net income and diluted earnings per share excluding the impact of one-time costs related to the Summit acquisition, acquisition-related purchase accounting adjustments and gains on the sale of investment securities.  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, although 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.

About Horizon
Horizon Bancorp is a locally owned, independent, commercial bank holding company serving Northern and Central Indiana and Southwest and Central Michigan through its commercial banking subsidiary Horizon Bank, NA.  Horizon also offers mortgage-banking services throughout the Midwest. Horizon Bancorp may be reached online at www.horizonbank.com<​/a>.  Its common stock is traded on the NASDAQ Global 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. 

The following tables present the amount and growth rate of loans by product type for the three and twelve months ended December 31, 2014.
View Financial Tables

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Horizon Bancorp
Mark E. Secor
Chief Financial Officer
(219) 873-2611
Fax: (219) 874-9280 
 


 

 

 
 
 

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