Horizon Bancorp (NASDAQ: HBNC) today announced its unaudited financial results for the three months ended March 31, 2010.

SUMMARY:
  • 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 averages1 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.”

Performance Highlights:

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 averages 1 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.

Other items
  • 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.

1 National peer group: Consists of all insured commercial banks having assets between $1 Billion and $10 Billion as reported by the Uniform Bank Performance Report as of December 31, 2009. Indiana peer group: Consists of 18 publicly traded banks all headquartered in the State of Indiana as reported by the Uniform Bank Performance Reports as of December 31, 2009.

HORIZON BANCORP
Financial Highlights

(Dollars in thousands except share and per share data and ratios, Unaudited)
       
March 31 December 31 September 30 June 30 March 31
2010   2009   2009   2009   2009

Balance sheet:

Total assets
$ 1,301,660 $ 1,387,020 $ 1,321,224 $ 1,343,296 $ 1,442,851
Short term investments 3,741 4,783 4,464 10,418 6,444
Investment securities 368,752 344,789 333,031 331,941 327,289
Commercial loans 310,664 314,517 312,573 313,857 313,840
Mortgage warehouse loans 96,327 166,698 145,270 163,083 186,058
Residential mortgage loans 135,475 133,892 142,568 146,096 160,478
Installment loans 266,954 271,210 275,299 272,394 273,728
Earning assets 1,203,784 1,254,781 1,232,549 1,260,807 1,288,214
Non-interest bearing deposit accounts 91,482 84,357 87,725 83,940 81,000
Interest bearing transaction accounts 423,315 540,647 375,548 388,954 489,699
Time deposits 358,725 326,704 394,724 375,256 406,790
Borrowings 273,235 284,016 311,884 349,499 320,956
Subordinated debentures 27,837 27,837 27,837 27,837 27,837
Common stockholders' equity 91,371 90,299 89,566 82,965 82,236
Total stockholders’ equity 115,716 114,605 113,833 107,194 106,427
 
Income statement: Three months ended
Net interest income $ 10,553 $ 11,371 $ 10,719 $ 11,263 $ 11,416
Provision for loan losses 3,233 3,700 3,416 3,290 3,197
Other income 4,374 4,304 4,542 4,516 4,494
Other expenses 9,554 9,558 8,929 9,928 9,397
Income tax expense 349 333 559 497 681
Net income 1,791 2,084 2,357 2,064 2,635
Preferred stock dividend (352 ) (351 ) (351 ) (350 ) (350 )
Net income available to common shareholders 1,439 1,733 2,006 1,714 2,285
 
Per share data:
Basic earnings per share $ 0.44 $ 0.53 $ 0.62 $ 0.53 $ 0.71
Diluted earnings per share 0.44 0.53 0.61 0.52 0.70
Cash dividends declared per common share 0.17 0.17 0.17 0.17 0.17
Book value per common share 27.88 27.67 27.46 25.85 25.62
Tangible book value per common share 25.70 25.45 25.22 23.55 23.30
Market value - high $ 19.50 $ 17.25 $ 17.50 $ 19.45 $ 13.21
Market value - low $ 16.44 $ 14.31 $ 15.00 $ 11.00 $ 10.50
Basic common shares outstanding 3,262,927 3,262,927 3,245,505 3,209,482 3,209,482
Diluted common shares outstanding 3,275,588 3,275,588 3,273,742 3,270,178 3,250,424
 
Key ratios:
Return on average assets 0.54 % 0.62 % 0.72 % 0.59 % 0.79 %
Return on average common stockholders' equity 6.34 7.56 9.12 8.01 11.18
Net interest margin 3.55 3.76 3.64 3.51 3.78
Loan loss reserve to total loans 1.97 1.80 1.58 1.40 1.23
Non-performing loans to loans 2.00 1.92 1.87 1.49 1.11
Average equity to average assets 8.73 8.61 8.53 7.80 7.94
Bank only capital ratios:
Tier 1 capital to average assets 8.83 8.64 8.79 8.22 8.51
Tier 1 capital to risk weighted assets 12.86 11.85 12.04 11.93 11.45
Total capital to risk weighted assets 14.10 13.10 13.29 13.19 12.61
 

HORIZON BANCORP
 
Allocation of the Allowance for Loan and Lease Losses

(Dollars in Thousands, Unaudited)
 
March 31   December 31   September 30   June 30   March 31
2010   2009   2009   2009   2009
Commercial $ 6,010 $ 5,766 $ 4,699 $ 3,076 $ 2,441
Real estate 1,444 1,933 1,599 1,511 1,038
Mortgage warehousing 1,390 1,455 1,480 1,453 1,428
Installment 7,276 6,861 6,146 6,609 6,682
Unallocated   -     -     -     -     -
Total $ 16,120   $ 16,015   $ 13,924   $ 12,649   $ 11,589
 
Net Charge-offs

(Dollars in Thousands, Unaudited)
 
Three months ended
March 31 December 31 September 30 June 30 March 31
2010   2009   2009   2009   2009
Commercial $ 1,832 $ 527 $ 530 $ 262 $ 1,076
Real estate 309 146 22 214 50
Mortgage warehousing - - - - -
Installment   986     936     1,589     1,754     1,892
Total $ 3,127   $ 1,609   $ 2,141   $ 2,230   $ 3,018
 
Total Non-performing Loans

(Dollars in Thousands, Unaudited)
 
March 31 December 31 September 30 June 30 March 31
2010   2009   2009   2009   2009
Commercial $ 7,024 $ 9,229 $ 9,235 $ 7,959 $ 6,474
Real estate 6,217 4,819 4,926 3,764 2,446
Mortgage warehousing - - - - -
Installment   3,149     3,097     2,312     1,754     1,549
Total $ 16,390   $ 17,145   $ 16,473   $ 13,477   $ 10,469
 
Other Real Estate Owned and Repossessed Assets

(Dollars in Thousands, Unaudited)
 
March 31 December 31 September 30 June 30 March 31
2010   2009   2009   2009   2009
Commercial $ 494 $ - $ - $ - $ -
Real estate 1,581 1,730 1,671 2,212 2,492
Mortgage warehousing - - - - -
Installment   101     23     142     115     204
Total $ 2,176   $ 1,753   $ 1,813   $ 2,327   $ 2,696
 
HORIZON BANCORP
 
Loan Portfolio Detail
         
Non- Percent Specific Percent of
Loan Performing of Reserves on Non - Non-performing
March 31, 2010 (Unaudited) Balance   Loans Loans Performing Loans Loans
Owner occupied real estate $ 142,877 $ 2,886 2.02% $ 525 18.19%
Non owner occupied real estate 102,128 1,101 1.08% - 0.00%
Residential development 10,276 1,563 15.21% 125 8.00%
Commercial and industrial 55,383   1,474 2.66% 433 29.38%
Total commercial 310,664 7,024 2.26% 1,083 15.42%
 
Residential mortgage 137,268 6,078 4.43% 590 9.71%
Residential construction 6,889 139 2.02% 27 19.42%
Mortgage warehouse 96,327   - 0.00% - 0.00%
Total mortgage 240,484 6,217 2.59% 617 9.92%
 
Direct installment 24,409 321 1.32% 48 14.95%
Indirect installment 131,291 1,022 0.78% 75 7.34%
Home equity 111,254   1,806 1.62% 1,141 63.18%
Total installment 266,954 3,149 1.18% 1,264 40.14%
       
Total loans 818,102 16,390 2.00% 2,964 18.08%
Allowance for loan losses (16,120)      
Net loans $ 801,982   $ 16,390 2.04% $ 2,964 18.08%
 
    Non-   Percent   Specific   Percent of
Loan Performing of Reserves on Non - Non-performing
December 31, 2009 (Unaudited) Balance   Loans Loans Performing Loans Loans
Owner occupied real estate $ 138,999 $ 3,152 2.27% $ 700 22.21%
Non owner occupied real estate 100,502 1,677 1.67% 125 7.45%
Residential development 16,101 2,343 14.55% 125 5.34%
Commercial and industrial 58,915   2,057 3.49% 725 35.25%
Total commercial 314,517 9,229 2.93% 1,675 18.15%
 
Residential mortgage 126,469 4,638 3.67% 441 9.51%
Residential construction 7,423 181 2.43% 71 39.29%
Mortgage warehouse 166,698   - 0.00% - 0.00%
Total mortgage 300,590 4,819 1.60% 512 10.62%
 
Direct installment 24,908 387 1.55% - 0.00%
Indirect installment 136,600 1,089 0.80% 95 8.72%
Home equity 109,702   1,621 1.48% 1,188 73.29%
Total installment 271,210 3,097 1.14% 1,283 41.43%
       
Total loans 886,317 17,145 1.93% 3,470 20.24%
Allowance for loan losses (16,015)      

Net loans
$ 870,302   $ 17,145 1.97% $ 3,470 20.24%
 
HORIZON BANCORP AND SUBSIDIARIES
Average Balance Sheets

(Dollar Amounts in Thousands, Unaudited)
   
Three Months Ended Three Months Ended
March 31, 2010 March 31, 2009
Average Average Average Average
Balance Interest Rate Balance Interest Rate
 
ASSETS
Interest-earning assets
Federal funds sold $ 68,209 $ 12 0.07 % $ 3,119 $ 2 0.26 %
Interest-earning deposits 4,857 5 0.42 % 4,550 5 0.45 %
Investment securities - taxable 253,848 2,429 3.88 % 245,134 2,842 4.70 %
Investment securities - non-taxable (1) 112,275 1,081 5.28 % 89,508 920 5.56 %
Loans receivable (2)   811,350     12,605 6.31 %   917,566     14,905 6.59 %
Total interest-earning assets (1) 1,250,539 16,132 5.36 % 1,259,877 18,674 6.11 %
 
Noninterest-earning assets
Cash and due from banks 13,852 23,119
Allowance for loan losses (16,001 ) (11,387 )
Other assets   84,904     76,270  
 
$ 1,333,294   $ 1,347,879  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities
Interest-bearing deposits $ 828,838 $ 2,763 1.35 % $ 784,791 $ 3,996 2.07 %
Borrowings 269,349 2,443 3.68 % 339,417 2,892 3.46 %
Subordinated debentures   27,837     373 5.43 %   27,837     370 5.39 %
Total interest-bearing liabilities 1,126,024 5,579 2.01 % 1,152,045 7,258 2.56 %
 
Noninterest-bearing liabilities
Demand deposits 82,659 79,785

Accrued interest payable and other liabilities
8,156 8,991
Shareholders' equity   116,455     107,058  
 
$ 1,333,294   $ 1,347,879  
 
Net interest income/spread $ 10,553 3.35 % $ 11,416 3.55 %
 

Net interest income as a percent of average interest earning assets (1)
3.55 % 3.78 %
(1)   Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
(2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
 
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands)
 
March 31 December 31
2010 2009
(Unaudited)    
Assets
Cash and due from banks $ 22,088 $ 63,919
Interest-bearing deposits 3,741 4,783
Investment securities, available for sale 351,630 333,132
Investment securities, held to maturity 17,122 11,657
Loans held for sale 8,682 5,703
Loans, net of allowance for loan losses of $16,120 and $16,015 793,300 870,302
Premises and equipment 30,628 30,534
Federal Reserve and Federal Home Loan Bank stock 13,189 13,189
Goodwill 5,787 5,787
Other intangible assets 1,372 1,447
Interest receivable 6,206 5,986
Cash value life insurance 23,295 23,139
Other assets   24,620     17,442
Total assets $ 1,301,660   $ 1,387,020
Liabilities
Deposits
Non-interest bearing $ 91,482 $ 84,357
Interest bearing   782,040     867,351
Total deposits 873,522 951,708
Borrowings 273,235 284,016
Subordinated debentures 27,837 27,837
Interest payable 1,038 1,135
Other liabilities   10,312     7,719
Total liabilities   1,185,944     1,272,415
Commitments and contingent liabilities
Stockholders’ Equity
Preferred stock, no par value, $1,000 liquidation value
Authorized, 1,000,000 shares
Issued 25,000 shares 24,345 24,306
Common stock, $.2222 stated value
Authorized, 22,500,000 shares
Issued, 3,295,953 and 3,273,881 shares 1,122 1,119
Additional paid-in capital 10,211 10,030
Retained earnings 74,310 73,431
Accumulated other comprehensive income   5,728     5,719
Total stockholders’ equity   115,716     114,605
Total liabilities and stockholders’ equity $ 1,301,660   $ 1,387,020
 
HORIZON BANCORP AND SUBSIDIARIES
Condensed Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Per Share Data)
 
Three Months Ended
March 31
(Unaudited)   (Unaudited)
2010     2009  
Interest Income
Loans receivable $ 12,605 $ 14,905
Investment securities
Taxable 2,446 2,849
Tax exempt   1,081       920  
Total interest income   16,132       18,674  
Interest Expense
Deposits 2,763 3,996
Borrowed funds 2,443 2,892
Subordinated debentures   373       370  
Total interest expense   5,579       7,258  
Net Interest Income 10,553 11,416
Provision for loan losses   3,233       3,197  
Net Interest Income after Provision for Loan Losses   7,320       8,219  
Other Income
Service charges on deposit accounts 865 934
Wire transfer fees 140 247
Interchange fees 454 388
Fiduciary activities 995 917
Gain on sale of mortgage loans 1,382 1,913
Mortgage servicing net of impairment 65 (134 )
Increase in cash surrender value of bank owned life insurance 156 156
Other income   317       73  
Total other income   4,374       4,494  
Other Expenses
Salaries and employee benefits 4,798 4,831
Net occupancy expenses 1,062 1,032
Data processing 402 379
Professional fees 471 395
Outside services and consultants 365 326
Loan expense 750 566
FDIC insurance expense 388 292
Other losses 27 385
Other expenses   1,291       1,191  
Total other expenses   9,554       9,397  
Income Before Income Tax 2,140 3,316
Income tax expense   349       681  
Net Income 1,791 2,635
Preferred stock dividend and discount accretion   (352 )     (350 )
Net Income Available to Common Shareholders $ 1,439     $ 2,285  
Basic Earnings Per Share $ 0.44 $ 0.71
Diluted Earnings Per Share 0.44 0.70

Copyright Business Wire 2010

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