Horizon Announces Continuation of Quarterly Profit
April 22, 2010 02:32 PM
Michigan City, Indiana (NASDAQ GM: HBNC) Horizon Bancorp today announced its unaudited financial results for the three months ended March 31, 2010.
- First quarter net income was $1.8 million or $0.44 diluted earnings per share.
- Lower volume in mortgage warehouse lending reduced average loans during the quarter, decreasing interest income.
- Horizon continued to experience steady residential mortgage loan activity through the first quarter with $1.4 million from the gain on sale of mortgage loans.
- Horizon continues to build loan loss reserves.
- Horizon's quarterly provision to the allowance for loan loss reserve decreased by approximately $467,000 from the fourth quarter of 2009. However the ratio of allowance for loan losses to total loans increased to 1.97% from 1.80% at December 31, 2009.
- Horizon's net loans charged off during the first quarter were $3.1 million compared to $1.6 million for the fourth quarter of 2009.
- Horizon's balance of Other Real Estate Owned increased approximately $345,000 during the first quarter primarily due to the addition of one commercial property.
- Horizon's non-performing loans decreased approximately $755,000 from December 31, 2009 to March 31, 2010.
- Horizon's non-performing loans to total loans ratio as of March 31, 2010 was 2.00%, which compares favorably to National and State of Indiana peer averages of 4.66% and 2.71%, respectively, of total loans as of December 31, 2009.
- Horizon's capital ratios continue to be above the regulatory standards for well-capitalized banks.
Craig M. Dwight, Chief Executive Officer of Horizon Bancorp stated, "We are proud to report a continuation of quarterly profits given the economic challenges and stress on loan portfolios throughout the industry. Horizon's success is a result of the cumulative effort of our dedicated team and their ability to accomplish goals and seek new opportunities."
Net income for the first quarter of 2010 was $1.8 million or $.44 diluted earnings per share. This compares to $2.6 million or $.71 diluted earnings per share for the same quarter of the prior year.
Diluted earnings per share were reduced by $.11 for the three months ending March 31, 2010 and March 31, 2009 due to the preferred stock dividends and the accretion of the discount on the preferred stock.
Net interest income decreased $863,000 for the three months of 2010 compared to the same prior year period. This was primarily due to lower interest income from lower interest earning assets partially offset by a decrease in the cost of funds. The net interest margin decreased to 3.55% for the three months ending March 31, 2010 from 3.78% in the prior year for the same period. The lower net interest margin for the first quarter of 2010 was the result of maintaining a higher average balance of cash and cash equivalents during the quarter that produced a low yield along with a decrease in the yields on interest earning assets that exceeded the decrease for the rates paid on interest bearing liabilities.
The reduction in the first quarter's interest income over the same period of the prior year was primarily due to the reduction in the average balance of mortgage warehouse lending to a more historic level along with lower asset yields from assets repricing in a low interest rate environment. Total interest income at March 31, 2010 was $2.5 million lower than first quarter of 2009. Interest expense during the first quarter of 2010 compared to the same period in 2009 decreased $1.7 million which partially offset the reduction in interest income. The lower interest expense was primarily due to Horizon's ability to reduce the costs of interest bearing liabilities by lowering deposit rates, decreasing borrowings, and changing the mix of funding by increasing the balance of lower cost deposits.
The provision for loan losses was $3.2 million for the three months ending March 31, 2010, which was approximately the same as for the first three months of the prior year. The first quarter provision was less than the $3.7 million, $3.4 million, and $3.3 million in reserves taken in the fourth, third, and second quarters of 2009. Consumer loan charge-offs continue to require quarterly provisions for loan losses but appear to be stabilizing as the amount of consumer charge-offs leveled off over the past two quarters. However, the increase in commercial charge-offs during the first quarter of 2010 and the level of non-performing loans required continued provision expense for anticipated loan losses.
Non-performing loans totaled $16.4 million on March 31, 2010, down from $17.1 million on December 31, 2009. As a percentage of total loans it was 1.98% on March 31, 2010, up slightly from 1.92% on December 31, 2009. Non-performing loans also increased from $10.5 million on March 31, 2009 which was 1.11% of total loans. Horizon's non-performing loan statistics compare favorably to National and State of Indiana peer averages1 of 4.66% and 2.71%, respectively, as of December 31, 2009.
The decrease of non-performing loans over the prior quarter was due to a decrease in commercial non-performing loans. Commercial non-performing loans were $7.0 million on March 31, 2010, down from $9.2 million on December 31, 2009, but up slightly from $6.5 million on March 31, 2009. The reduction during the quarter was primarily due to one loan becoming current, two loans being written off, and one loan relationship moving to OREO. A $1.0 million commercial loan that was over 90 days past maturity on December 31, 2009 was renewed in the first quarter. A loan secured by vacant land was written down by $780,000 based on a new appraisal received during the quarter. Also, a loan to a bankrupt manufacturer was written down by $700,000 during the first quarter of 2010. Four commercial loans totaling $685,000 on December 31, 2009 were moved to OREO during the quarter. These reductions were partially offset by four loans added to non-performing status during the quarter totaling $1.1 million. The slight increase in the Company's non-performing loans over the past year can be attributed to the continued national and local economic problems, including, continued high local unemployment causing lower business revenues and increased consumer bankruptcies.
Non-accrual loans totaled $14.9 million on March 31, 2010, down from $15.4 million on December 31, 2009, but up from $9.7 million on March 31, 2009. Nonaccrual loans to restaurant operators totaled $2.6 million on March 31, 2010, the same as the previous quarter. Nonaccrual loans to home builders and land developers totaled $2.1 million on March 31, 2010, down from $2.2 million on December 31, 2009. Mortgage loans on non-accrual totaled $4.9 million on March 31, 2010, up from $4.6 million on December 31, 2009. Consumer loans on non-accrual increased to $2.9 million from $2.7 million during the quarter.
Loans 90 days delinquent but still accruing interest totaled $345,000 on March 31, 2010, down from $1,758,000 on December 31, 2009 and $730,000 on March 31, 2009. The decline from December 31, 2009 was primarily due to the aforementioned $1.0 million commercial loan that was brought current. Horizon's policy is to place loans over 90 days delinquent on non-accrual unless they are in the process of collection and full recovery is expected.
Other Real Estate Owned (OREO) totaled $2.2 million on March 31, 2010, up from $1.7 million on December 31, 2009, but down from $2.5 million on March 31, 2009. During the first quarter two properties with a book value of $654,000 on December 31, 2009 were sold. Another 14 properties with a book value of $1.2 million on December 31, 2009 were transferred into OREO status. On March 31, 2010, OREO was comprised of 43 properties. Of these 32 totaling $1.7 million were residential and four totaling $500,000 were commercial.
No mortgage warehouse loans were non-performing or OREO as of March 31, 2010, December 31, 2009, or March 31, 2009.
The residential mortgage loan activity continued to be steady through the first quarter of 2010 with $1.4 million from gain on sale of mortgage loans, down from $1.9 million during the same period in 2009 and up from $1.2 million in the fourth quarter of 2009. Service charges on deposit accounts and wire transfer fees were down during the first quarter compared to the same period in 2009 primarily due to reduced consumer and mortgage warehousing activity.
Total other expenses were $157,000 higher in the first quarter of 2010 compared to the first quarter of 2009. Loan collection costs, which are included in loan expense and FDIC insurance contributed to the increase. In addition, approximately $109,000 of expense was recognized during the first quarter of 2010 related the anticipated purchase and assumption of American Trust & Savings Bank.
- Horizon anticipates completing the American Trust & Savings Bank acquisition in the second quarter in which we will acquire approximately $110.0 million in assets and assume approximately $112.0 million in liabilities comprised mostly of deposits.
- Horizon anticipates additional transaction costs related to the American Trust & Savings Bank acquisition in the second quarter of 2010.
- Horizon is relocating its South Bend Office in the third quarter of 2010 and should lower related occupancy expense by approximately $95,000 per year.
- Robert E. McBride, MD retired from our Board of Directors effective April 13, 2010. Dr. McBride served our Board admirably for over 25 years and his contributions and loyalty to the Company contributed to our success.
Horizon Bancorp is a locally owned, independent, commercial bank holding company serving Northern Indiana and Southwest Michigan. Horizon also offers mortgage-banking services throughout the Midwest. Horizon Bancorp may be reached online at www.accesshorizon.com. Its common stock is traded on the NASDAQ Global Market under the symbol HBNC.
Statements in this press release which express "belief," "intention," "expectation," and similar expressions, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company's management, as well as assumptions made by, and information currently available to, such management. Such statements are inherently uncertain and there can be no assurance that the underlying assumptions will prove to be accurate. Actual results could differ materially from those contemplated by the forward-looking statements. Any forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Contact: Horizon Bancorp
Mark E. Secor
Chief Financial Officer
Fax: (219) 874-9280