Horizon Bancorp Announces Third Quarter and Year-to-Date Earnings

Press Release

Horizon Bancorp Announces Third Quarter and Year-to-Date Earnings

Font Scale:

Posted 23 October 2008 @ 09:45 am ET

Horizon Bancorp (NASDAQ: HBNC) today announced its unaudited financial results for the quarter and nine months ended September 30, 2008. Net income for the third quarter of 2008 was $1.3 million or $.41 per fully diluted share. This compares to $2.3 million or $.70 per fully diluted share for the same quarter of the prior year. Year-to-date net income was $6.85 million or $2.11 per fully diluted share compared to $6.13 million or $1.89 per fully diluted share for the same period of the prior year. This represents an 11.7% increase in year-to-date net income.

Craig M. Dwight, Horizon's Chief Executive Officer stated, "Given the volatile markets and rising unemployment rates, Horizon is extremely proud to report year-to-date earnings ahead of prior year. In addition, Horizon Bank, NA continues to maintain its capital ratios above the regulatory definition for well capitalized banks. Profitable banks with good capital ratios, such as Horizon, are positioned well to take advantage of future opportunities."

Net interest income for the quarter and nine months ended September 30, 2008 was $9.4 million and $27.7 million, respectively. These represent increases of $1.1 million or 13.9% for the quarter and $3.7 million or 15.6% for the first nine months when compared to the same prior year periods. These increases resulted from an improvement in the net interest margin of 44 basis points to 3.45% for the quarter and 33 basis points to 3.31% for the nine-month period. The improvement resulted primarily from reductions in funding costs that exceeded declines in yields on earning assets. Horizon's cost of funds has dropped approximately 109 basis points since the third quarter of 2007 while the yield on earning assets declined only 65 basis points. Horizon reduced rates on NOW and money market accounts in line with short-term rate decreases put in place by the Federal Open Market Committee. In addition, a large amount of Certificates of Deposit (CDs) matured during the first half of 2008 and were reinvested at lower rates.

Horizon assesses the adequacy of its Allowance for Loan and Lease Losses ("ALLL") by regularly reviewing the performance of all of its loan portfolios. As a result of its most recent review, Horizon determined that there had been recent deterioration in the commercial and indirect loan portfolios. As a result, a provision for loan losses of $3.1 million was taken for the third quarter of 2008. This compares to a provision of $1.5 million for the second quarter of 2008 and $550 thousand for the third quarter of 2007. This increase is primarily due to the deterioration of three commercial loans. In addition, Horizon has experienced increased repossessions and voluntary surrenders of vehicles in its indirect loan portfolio. As a result, Horizon has adjusted the historical ratios used to determine the ALLL to reflect these recent trends.

For the third quarter of 2008, Horizon's non-performing loans of approximately $6.6 million were level with the second quarter but increased from the September 30, 2007 level of $2.3 million. Total non-performing loans as of September 30, 2008 were approximately 0.77% of total loans. This compares favorably to national¹ and State of Indiana² bank averages for the same ratio as of June 30, 2008 of 1.73% and 1.62 %, respectively. Net charge-offs for the quarter were $2.4 million compared to $392 thousand for the same quarter of 2007. The current quarter charge-offs related to an increase in commercial and indirect loans. Additionally, Horizon has $1.4 million of other real estate owned, which represent an increase from June 30, 2008 of $724 thousand. Management feels that the total ALLL of $10.525 million or 1.22% of total loans is adequate to absorb probable losses contained in the loan portfolio.

Non-interest income increased $221 thousand or 7.1% from the third quarter of 2007 and has increased $1.5 million or 16.5% for the first nine months of 2008. The quarterly increase relates to an increase in non-sufficient check charges implemented in the first quarter of 2008. Also improving year to date non-interest income was, (a) an increase in fiduciary income due to additional revenue from Horizon's ESOP management line of business, (b) an increase in gain on sale of loans resulting from an increase in the dollar amount of loans sold and (c) a death benefit received on a bank owned life insurance policy.

Non-interest expense increased $540 thousand or 7.0% from the third quarter of 2007 and $977 thousand or 4.1% for the first nine months. Salaries and benefits decreased due to the staff reduction, which occurred during the third quarter of 2007. Loan expense increased from the prior year due to higher collection expense and less deferred costs on new loans.

The effective tax rate declined to 0% for the third quarter of 2008 compared to 26.7% in the third quarter of 2007. Pre-tax income was almost entirely offset by tax-exempt interest income generated from tax-exempt loans and investments as well as the increase in cash surrender value of officer life insurance. Also during the current quarter, Horizon realized $47 thousand from amended returns filed to claim additional tax benefits related to Horizon's investment subsidiary.

On September 30, 2008, Horizon's total assets were $1.189 billion, compared to $1.259 billion on December 31, 2007. Loans declined $32 million since December 31, 2007. The decline was related to the sale of $37 million of adjustable rate mortgage loans. The mortgage loans were sold to reduce Horizon's reliance on non-core funding and improve bank capital ratios. Commercial and installment loans were down slightly form the previous year-end. These decreases were partially offset by an increase in mortgage warehouse loans.

Deposits declined $144 million since the end of 2007. The decrease came in both negotiable and high cost, short-term consumer CDs. The deposit fall off was funded by a decline in assets of $70 million, additional borrowings of $70 million, which were at lower rates than the maturing CDs, and an increase of $4 million in equity.

Stockholders' equity totaled $75.1 million at September 30, 2008 compared to $70.6 million at DecemberÂ 31, 2007. The increase in stockholders' equity during the period was the result of net income, offset by a decrease in market value of available for sale securities and dividends declared. At September 30, 2008, the ratio of stockholders' equity to total assets was 6.32% compared to 5.61% at December 31, 2007. Book value per common share at September 30, 2008 was $23.39 compared to $22.04 at December 31, 2007. Horizon's capital ratios exceed the regulatory well-capitalized minimums.

Other items

Horizon opened its 17^th full service office on July 14, 2008. The branch is located at 8590 Broadway, Merrillville, Lake County, Indiana 46410. This is Horizon's first full service branch location in Lake County.

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 on the World Wide Web 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 $3 Billion as reported by the Uniform Bank Performance Report as of June 30, 2008

² Indiana peer group: Consists of 22 publicly traded banks all head quartered in the State of Indiana as reported by the Uniform Bank Performance Reports as of June 30, 2008.

HORIZON BANCORP

Financial Highlights

(Unaudited - dollars in thousands except share and per share data and ratios)

Three Months Ended:

Nine Months Ended:

Sept. 30,

June 30,

Sept. 30,

2008

2007

2008

2007

End of period balances:

Total assets

1,188,631

1,194,447

1,194,246

1,188,631

1,194,246

Short term investments

1,186

1,378

120

1,186

120

Investment securities

230,837

252,791

230,631

230,837

230,631

Commercial loans

304,997

303,179

305,502

304,997

305,502

Mortgage warehouse loans

101,992

82,865

52,539

101,992

52,539

Real estate loans

168,058

168,940

217,716

168,058

217,716

Installment loans

282,900

283,430

277,552

282,900

277,552

Earning assets

1,107,428

1,115,240

1,114,616

1,107,428

1,114,616

Non-interest bearing deposit accounts

86,093

81,212

79,034

86,093

79,034

Interest bearing transaction accounts

334,121

349,737

333,069

334,121

333,069

Time deposits

329,208

361,307

383,741

329,208

383,741

Borrowings

328,442

293,423

266,626

328,442

266,626

Subordinated debentures

27,837

Stockholder's equity

75,072

73,613

67,666

75,072

67,666

Average balances:

Total assets

1,179,045

1,190,134

1,194,146

1,209,188

1,174,861

Short term investments

3,682

14,519

6,472

6,780

2,005

Investment securities

239,304

251,433

225,541

242,118

227,109

Commercial loans

301,810

301,710

301,255

303,669

287,342

Mortgage warehouse loans

85,230

77,144

61,170

78,070

75,900

Real estate loans

167,793

169,780

219,966

178,531

224,010

Installment loans

283,669

281,948

259,862

283,485

246,430

Earning assets

1,101,002

1,119,467

110,521

1,133,142

1,096,742

Non-interest bearing deposit accounts

80,762

76,802

78,073

76,940

76,288

Interest bearing transaction accounts

340,012

362,087

346,535

363,445

348,644

Time deposits

351,888

370,390

401,247

383,727

405,816

Borrowings

296,280

270,171

258,722

275,011

214,171

Subordinated debentures

27,837

Stockholder's equity

76,027

76,708

65,628

75,446

64,901

Per share data:

Basic earnings per share

0.42

0.93

0.63

2.14

1.92

Diluted earnings per share

0.41

0.92

0.62

2.11

1.89

Cash dividends declared per common share

0.17

0.15

0.49

0.44

Book value per common share

23.39

22.94

19.77

23.39

21.13

Market value - high

25.87

23.99

28.05

25.87

28.10

Market value - low

16.36

17.53

26.80

16.36

26.60

Basic average common shares outstanding

3,209,482

3,208,419

3,200,259

3,208,362

3,198,999

Diluted average common shares outstanding

3,255,409

3,238,331

3,243,537

3,246,208

3,241,991

Key ratios:

Return on average assets

0.45

1.00

0.76

For more information, go to www.businesswire.com

Sponsored By

Recent Press Release

IBTimes

PR newswire

Marketwire

POS Magnetic Card Readers

Online distributor for point of sale equipment, TYSSO and Pegasus.

www.poskit.com

Partners

MORE at IBTimes

Horizon Bancorp Announces Third Quarter and Year-to-Date Earnings

POS Magnetic Card Readers