Michigan City, Indiana, April 28, 2021 (GLOBE NEWSWIRE) — (NASDAQ GS: HBNC) — Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three months ending March 31, 2021.
“Horizon completed the first quarter with over $6 billion in assets, strong profitability, modest provision expense, further reductions in deposit costs, and continued improvement in key asset quality metrics,“ Chairman and CEO Craig M. Dwight said. “Coming off a record year of residential lending, we were very pleased with mortgage activity and fee income in what has historically been our seasonally lightest volume quarter. In addition, our commercial pipeline of approved and unfunded loans and lines of credit, coupled with the current outlook of the businesses and communities we serve in growing Indiana and Michigan markets, leads us to anticipate improving demand from customer investments in plant and equipment, logistics and distribution, infrastructure, and other financing needs in a recovery economy. Given our balance sheet, highly efficient operations and talented workforce, we believe Horizon is very well positioned to capitalize on significant organic and strategic growth opportunities within our attractive Midwestern markets.”
First Quarter 2021 Highlights
- Earned net income of $20.4 million, or $0.46 diluted earnings per share, compared to $21.9 million, or $0.50 diluted earnings per share, for the fourth quarter of 2020 and $11.7 million, or $0.26 diluted earnings per share, for the first quarter of 2020.
- Pre–tax, pre–provision net income totaled a first–quarter record $24.2 million, compared to $26.9 million for the fourth quarter of 2020 and $21.8 million for the first three months of 2020. 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 Income” table below.)
- Non–interest expense was $32.2 million in the quarter, or 2.20% of average assets on an annualized basis, compared to $36.5 million, or 2.47%, in the fourth quarter of 2020 and $31.1 million, or 2.38%, in the first quarter of 2020.
- The efficiency ratio for the period was 57.03% compared to 57.54% for the fourth quarter of 2020 and 58.79% for the first quarter of 2020. The adjusted efficiency ratio was 57.97% compared to 56.48% for the fourth quarter of 2020 and 59.43% for the first quarter of 2020. (See the “Non-GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below.)
- Generated return on average assets (“ROAA”) of 1.40% and return on average common equity (“ROACE”) of 11.88% in the quarter, as well as adjusted ROAA of 1.35% and adjusted ROACE of 11.46%, excluding the impact of gains on sale of investment securities, net of tax. (See the “Non–GAAP Reconciliation of Return on Average Assets” and the “Non–GAAP Reconciliation of Return on Average Common Equity” tables below.)
- Following record residential lending last year and during what has historically been its seasonally lightest volume quarter, mortgage–related non–interest income remained strong in the first three months of 2021, with gain on mortgage loan sales of $5.3 million and net mortgage servicing income of $213,000. The bank originated $155.6 million in mortgage loans during the quarter, with 65% of volume from refinances, as Horizon continued to focus residential lending on prime borrowers in Indiana and Michigan markets.
- Net interest income was $42.5 million for the quarter, compared to $43.6 million for the fourth quarter of 2020 and $40.9 million for the first quarter of 2020. First quarter 2021 net interest income remained relatively stable in the current environment, given previously disclosed initiatives to optimize returns on earning assets, including increasing investment securities to 23.5% of assets from 22.1% in the fourth quarter of 2020 and 20.6% in the first quarter of 2020.
- Reported net interest margin (“NIM”) of 3.29% and adjusted NIM of 3.17%, with reported NIM declining by 5 basis points and adjusted NIM decreasing by 27 basis points from the fourth quarter of 2020. (See the “Non–GAAP Reconciliation of Net Interest Margin” table for the definition of this non–GAAP calculation.) An estimated 10 basis points attributed to Federal Paycheck Protection Program (“PPP”) lending improved the margin, offset by an estimated 16 basis point compression attributed to excess liquidity held during the quarter, for both NIM and adjusted NIM.
- Horizon’s in–market consumer and commercial deposit relationships, combined with strategic pricing moves to manage deposit growth and runoff of higher–priced time deposits, contributed to continued improvement in the cost of interest bearing liabilities, which declined to 0.50% in the quarter, compared to 0.94% in the fourth quarter of 2020 and 1.13% in the first quarter of 2020.
- Increased the allowance for credit losses (“ACL”) 0.3% year–to–date to $57.2 million at period end, representing 1.56% 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 represented 1.67% of loans excluding $252.3 million in PPP loans, and 228.1% of non–performing loans.
- COVID–19 deferral levels improved to 2.7% of total loans at period end, compared to 3.3% on December 31, 2020, and the bank experienced no material specific loan losses attributable to COVID–19 closures.
- Maintained solid asset quality metrics at period end, including non–performing loans declining 6.5% during the quarter to $25.1 million, or 0.68% of total loans, and substandard loans declining 12.5% to $86.5 million, or 2.4% of total loans, while net charge–offs remained unchanged at 0.01% of average loans for the period.
- Loans excluding PPP lending totaled $3.42 billion on March 31, 2021, reflecting Horizon’s successful efforts to secure payoffs of loans previously classified as substandard, as well as cash reserves maintained by many current and prospective commercial borrowers and retail households through the quarter. Loans excluding PPP lending totaled $3.67 billion on December 31, 2020 and $3.71 billion on March 31, 2020.
- Horizon announced an 8.3% increase in its quarterly cash dividend in March to $0.13 per share, paying uninterrupted dividends for over 30 years. As of March 31, 2021, in excess of $127 million in cash was maintained at the holding company, providing considerable future optionality to build shareholder value.
- Horizon opened a new full–service branch on March 31, 2021 in Gary to improve access to financial services in this Northwest Indiana community.
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