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Horizon Bancorp Reports 1st Quarter 2014 Earnings [Manufacturing Close - Up](Manufacturing Close - Up Via Acquire Media NewsEdge) Horizon Bancorp announced its unaudited financial results for the three-month period ended March 31. In a release on April 21, the Company noted highlights: -First quarter 2014 net income was $3.4 million or $.38 diluted earnings per share. -Excluding fees related to the acquisition of SCB Bancorp, Inc., net income for the first quarter of 2014 was $3.6 million or $.40 diluted earnings per share. -Net interest income, after provisions for loan losses, for the first three months of 2014 was $13.3 million compared with $13.9 million for the same period in the prior year. -Horizon's previously announced acquisition of SCB Bancorp, Inc. and its subsidiary, Summit Community Bank, headquartered in East Lansing, Michigan closed as scheduled on April 3. -Horizon did not record a provision for the three months ended March 31, compared with a provision of $2.1 million for same period of 2013. -Non-interest income was $5.5 million in first quarter 2014 compared with $7.5 million in the same period of 2013, reflecting a decrease of $1.7 million in gain on sale of loans and a decrease of $368,000 in gain on sale of investment securities. -Total loans increased $34.0 million during the quarter to $1.1 billion at March 31. -Commercial loans increased $23.4 million during the quarter or 4.6 percent to $528.6 million at March 31. -Core deposits increased $67.7 million during the quarter or 6.7 percent to $1.1 billion at March 31. -Horizon's tangible book value per share rose to $15.52 at March 31, compared to $14.97 at December 31, 2013 and $14.64 at March 31, 2013. -Horizon Bank's capital ratios, including Tier 1 Capital to Average Assets of 9.51 percent and Total Capital to Risk Weighted Assets of 14.12 percent as of March 31, continue to be well above the regulatory standards for well-capitalized banks. Craig M. Dwight, Chairman and CEO, commented: "We are very pleased to continue Horizon's growth story this quarter by achieving solid loan and core deposit growth despite the highly competitive environment and tepid economic recovery. This growth speaks to the quality and dedication of our team to expand existing client relationships and source new business opportunities." Dwight specifically noted the growth in commercial loans during the quarter which increased $23.4 million to $528.6 million at March 31. On an annualized basis this amounts to an increase of 18.6 percent. While Horizon experienced loan growth in a majority of the Bank's markets, Kalamazoo and Indianapolis contributed $15.9 million or 46.8 percent of the $34.0 million in total loan growth during the first three months of 2014. Dwight continued, "The slowdown in residential mortgage lending negatively impacted our results in the first quarter of 2014, continuing to validate Horizon's four balanced revenue streams - business banking, retail banking, residential mortgage lending and wealth & investment management. In anticipation of the residential mortgage lending slowdown, we made significant investments in new market entries, employee talent, commitment to customer service guarantees and technology to provide the best in class service to our customers. Our results this quarter illustrate these investments are paying off. At the same time, our continued asset quality improvement has enabled the Bank to significantly reduce our provision for loan losses, reflecting the hard work of our collections and credit administration staff." Dwight noted the Bank continues to build core deposits to help maintain a low cost of funding. Core deposit accounts grew $67.7 million or 6.7 percent during the first quarter of 2014 to $1.1 billion compared with $1.0 billion as of December 31, 2013 and March 31, 2013. On March 25, shareholders of SCB Bancorp, Inc. approved Horizon's previously announced acquisition of SCB Bancorp, Inc. and its subsidiary, Summit Community Bank, headquartered in East Lansing, Michigan. The transaction closed as scheduled on April 3, and the systems integration is expected to be completed on April 26. Dwight commented, "This transaction reflects Horizon's approach to looking for growth opportunities both organically and through strategic partnerships. By partnering with SCB Bancorp, Horizon added an exceptional group of employees to our staff and entered another significant market with tremendous potential. We are delighted to welcome Summit Community Bank to our team and look forward to them contributing to Horizon's future success." Additionally, on February 28, Horizon completed the acquisition of 1st Mortgage of Indiana, adding an experienced group of high quality mortgage professionals to our Indianapolis presence. Emerging Issues Horizon has acquired land in Carmel and Fishers, Indiana with the expectation to build two full service offices in this Central Indiana growth market. Horizon has on board two seasoned bankers working from a loan production office to support our Carmel expansion efforts and has commenced a search for qualified and seasoned bankers in the Fishers market area. Income Statement Highlights Net income for the first quarter of 2014 was $3.4 million or $.38 diluted earnings per share compared to $5.3 million or $.58 diluted earnings per share in the first quarter of 2013. Excluding transaction expenses related to the acquisition of SCB Bancorp, Inc. of $311,000, net income would have been $3.6 million or $.40 for the first quarter of 2014. The decrease in net income for the quarter primarily reflects the decline in mortgage warehouse activity as well as a reduction in interest income from Heartland loan valuation discounts recognized at the time of acquisition being accreted and discounts recognized from loans paying off. Mortgage warehouse balances decreased from $143.6 million as of March 31, 2013 to $102.1 million as of March 31, and the gain on sale of mortgage loans decreased $1.7 million from $3.1 million in the first quarter of 2013 to $1.4 million in the first quarter of 2014. Interest income from the Heartland loan valuation discounts decreased by $1.6 million to $389,000 for the three months ending March 31, compared to $2.0 million for the three months ending March 31, 2013. Horizon's net interest margin was 3.48 percent during the first quarter of 2014, down from 4.10 percent for same period of 2013. Excluding the interest income recognized from the loan discounts, the margin would have been 3.38 percent for the three-month period ending March 31, compared to 3.62 percent for the three-month period ending March 31, 2013. The decrease in net interest margin was primarily attributable to a reduction in mortgage warehouse activity in the first quarter of 2014 compared to the first quarter of 2013 and lower yields on new and repricing earning assets. Residential mortgage lending activity during the first quarter of 2014 generated $1.4 million in income from the gain on sale of mortgage loans, a decrease of $1.7 million from the first quarter of 2013 and an increase of $197,000 from the fourth quarter of 2013. Total origination volume in the first quarter of 2014 totaled $52.6 million, representing a decrease of 22.0 percent from the previous quarter of $67.4 million and a decrease of 41.2 percent from the first quarter of 2013 of $89.5 million. The reduction in the gain on sale of mortgages was due to a decrease in total origination volume, partially offset by an increase in the percentage earned on the sale of these loans. Purchase money mortgage originations during the first quarter of 2014 represented 70.6 percent of total originations compared to 75.3 percent of originations during the fourth quarter of 2013 and 43.7 percent during the first quarter of 2013. Lending Activity Total loans increased $34.0 million from December 31, 2013 to $1.1 billion at March 31, as mortgage warehouse loans increased by $4.0 million, residential mortgage loans increased by $3.9 million and consumer loans increased by $595,000. Commercial loans increased $23.4 million or 4.6 percent from $505.2 million at December 31, 2013 to $528.6 million at March 31. "Our focus on loan growth by investing in high quality employees and expanding our reach showed substantial results in the first quarter of 2014," Dwight commented. "Investments in lending personnel and key growth markets, has positioned the bank well for future market share gains without the need to sacrifice our disciplined credit culture." Total loan balances in the Kalamazoo and Indianapolis markets continued to grow during the first quarter of 2014 to $120.4 million and $81.0 million, respectively, as of March 31. Kalamazoo's aggregate loan balances increased $6.6 million or 5.8 percent and Indianapolis' aggregate loan balances increased $9.3 million or 12.9 percent during the three months ended March 31. In the first quarter of 2014, Horizon did not record a provision for loan losses compared to a provision for loan losses of $2.1 million for the same period of the prior year. The lower provision for loan losses in the first quarter of 2014 compared to the same period of 2013 was due to the continued improvement of nonperforming and substandard loans. The ratio of the allowance for loan losses to total loans decreased to 1.46 percent as of March 31, from 1.49 percent as of December 31, 2013 due to the increase in total loans. The increase in allowance for loan losses from $16.0 million as of December 31, 2013 to $16.1 million as of March 31, was due to net recoveries of $110,000 during the first quarter of 2014. Non-performing loans totaled $17.6 million as of March 31, down from $18.3 million as of December 31, 2013. Compared to December 31, 2013, non-performing commercial loans and consumer loans decreased by $158,000 and $695,000, respectively, partially offset by an increase of $212,000 in non-performing real estate loans. As a percentage of total loans, non-performing loans were 1.59 percent at March 31, down 11 basis points from 1.70 percent at December 31, 2013. At March 31, loans acquired in the Heartland acquisition represented $4.2 million in non-performing, $9.0 million in substandard and $150,000 in delinquent loans, which compares to $4.5 million in non-performing, $10.3 million in substandard and $323,000 in delinquent loans at December 31, 2013. Expense Management Total non-interest expense was $535,000 higher in the first quarter of 2014 compared to the same period of 2013 and $1.1 million lower compared to the fourth quarter of 2013. The increase in the first quarter of 2014 compared to the same period of 2013 was primarily due to an increase in net occupancy expenses, data processing expenses and professional fees. In addition, the first quarter of 2014 included $311,000 of expenses related to the acquisition of SCB Bancorp, Inc. consisting of $169,000 in professional fees and $142,000 of outside service and consultant expenses. The decrease in the first quarter of 2014 compared to the previous quarter primarily consisted of a decrease in salaries and employee benefits and other losses of $630,000 and 623,000, respectively. Horizon Bancorp is a locally owned, independent, commercial bank holding company serving Northern and Central Indiana and Southwest Michigan through its commercial banking subsidiary Horizon Bank, NA. Report Information: http://www.horizonbank.com ((Comments on this story may be sent to [email protected])) (c) 2014 ProQuest Information and Learning Company; All Rights Reserved. |