Horizon Bancorp, Inc. Announces Third Quarter 2020 Financial Results

October 28, 2020 03:41 PM
 
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Michigan City, Indiana, October 28, 2020 (GLOBE NEWSWIRE) — (NASDAQ GS: HBNC) — Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three and nine months ending September 30, 2020.

 

“Horizon is successfully navigating through these challenging times, thanks to our team’s unwavering focus on our communities, customers and our culture of accountability and operating discipline,” Chairman and CEO Craig M. Dwight said. “In the third quarter, we saw a healthy recovery in earnings and meaningful growth in pre–tax, pre–provision income, as Horizon maintained sound asset quality metrics and continued to conservatively build reserves, tightly managed operating expenses, stabilized net interest income and margin, and benefited from very strong performance from our mortgage business. In addition, in future periods, we expect to benefit from efforts initiated in the early fourth quarter to deleverage and optimize returns on earning assets.”

 

Third Quarter 2020 Highlights

 

  • Earned net income of $20.3 million, or $0.46 diluted earnings per share, compared to $14.6 million, or $0.33 diluted earnings per share, for the second quarter of 2020 and $20.5 million, or $0.46 diluted earnings per share, for the third quarter of 2019.

 

  • Grew pre–tax, pre–provision net income to $26.7 million for the quarter, compared to $23.7 million for the second quarter of 2020 and $24.9 million for the third quarter of 2019. This non–GAAP financial measure is utilized by banks to provide a greater understanding of pre–tax profitability before giving effect to credit loss expense. (See the “Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income” table below.)

 

  • Reported return on average assets (“ROAA”) of 1.40% and return on average common equity (“ROACE”) of 12.08% in the quarter, as well as adjusted ROAA of 1.34% and adjusted ROACE of 11.55%, excluding the impact of gains on sale of investment securities, net of tax. (See the “Non–GAAP Reconciliation of Return on Average Assets and Return on Average Common Equity” tables below.)

 

  • Increased the allowance for credit losses (“ACL”) 2.2% during the quarter and 218.8% year–to–date to $56.3 million at period end, representing 1.39% of total loans, reflecting implementation of the Current Expected Credit Losses (“CECL”) accounting method and prudent increases in the Company’s general reserves. ACL at period end also represented 1.51% of loans excluding $310.8 million in Federal Paycheck Protection Program (“PPP”) loans, and 192.1% of non–performing loans.

 

  • Maintained solid asset quality metrics, including non–performing and delinquent loans representing 0.72% and 0.15% of total loans, respectively, at September 30, 2020, while net charge–offs were 0.02% of average loans for the period.

 

  • COVID–19 deferral levels improved to 4.1% of total loans at period end, from 14.3% on June 30, 2020.

 

  • Reported non–interest expense of $33.4 million, representing 2.30% of average assets on an annualized basis compared to 2.18% for the second quarter of 2020 and 2.34% for the third quarter of 2019.

 

  • Improved the efficiency ratio in the period to 55.59% compared to 56.23% for the second quarter of 2020. (See the “Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” tables below.)

 

  • Generated record gain on mortgage loan sales of $8.8 million, up 33.1% from the linked quarter and 226.2% from the prior year period, and originated $207.1 million in mortgage loans during the quarter, down 18.1% from the record second quarter of 2020 and up 71.0% from the third quarter of 2019.

 

  • Reported net interest margin of 3.39% and adjusted net interest margin of 3.27%, with each declining by 8 basis points from the second quarter of 2020. (See the “Non–GAAP Reconciliation of Net Interest Margin” table for the definition of this non–GAAP calculation). An estimated 1 basis points of compression is attributed to PPP lending and an estimated 10 basis points of compression is attributed to subordinated notes during the quarter, for both net interest margin and adjusted net interest margin.

 

  • Horizon’s tangible book value per share increased from $10.63 at December 31, 2019 to $11.29 at September 30, 2020, which includes the accounting adjustment for CECL as of January 1, 2020. This represents the highest tangible book value per share in the Company’s history. (See the “Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share” tables below.)

 

  • Maintained strong liquidity position including approximately $1.3 billion in cash and investment securities, which is approximately 22.4% of total assets, and approximately $928.0 million in unused availability on lines of credit, at September 30, 2020.

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