Horizon Bancorp Profits Nearly FlatPosted: Updated:
Michigan City-based Horizon Bancorp Inc. (Nasdaq: HBNC) is reporting third quarter net income of $4.8 million, compared to $4.9 million for the same period a year earlier. Chief Executive Officer Craig Dwight says the slight decrease can be partly attributed to an anticipated slowdown in residential mortgage refinancings. October 17, 2013
MICHIGAN CITY, Ind. - Horizon Bancorp (Nasdaq: HBNC) today announced its unaudited financial results for the three and nine-month periods ended September 30, 2013.
SUMMARY AND HIGHLIGHTS:
-Third quarter 2013 net income declined 1.3 percent compared to the same period in 2012 to $4.8 million or $.52 diluted earnings per share, with the decline primarily reflecting lower income from residential lending, including mortgage warehousing, as demand for mortgage refinancing slowed.
-Net income for the first nine months of 2013 rose 9.7 percent compared to the same period in 2012 to $15.8 million or $1.72 diluted earnings per share, the highest first nine months of net income in the Company's history.
-Net interest income, before provisions for loan losses, for the first nine months of 2013 was $47.3 million compared with $41.2 million for the same period of 2012, partially reflecting commercial loan growth that helped offset lower mortgage business revenue.
-Non-interest income rose 4.2 percent to $20.2 million for the first nine months of 2013 compared with $19.4 million for the same period of 2012, partially reflecting growth in fees from debit and credit card interchange services and income growth from fiduciary activities, partially offset by a decline in gains on sale of mortgage loans.
-Return on average assets was 1.09 percent for the third quarter of 2013 and 1.20 percent for the first nine months of 2013.
-Return on average common equity was 12.60 percent for the third quarter of 2013 and 13.82 percent for the first nine months of 2013.
-Purchase money mortgage originations for the third quarter of 2013 increased 7.7 percent to $73.3 million, representing 69.5 percent of total mortgage originations compared to $68.0 million or 51.4 percent of total mortgage originations for the same period of 2012.
-Kalamazoo and Indianapolis markets posted quarterly loan growth of $2.2 million and $8.9 million, respectively, and year over year loan growth of $17.9 million and $34.4 million to $106.9 million and $68.3 million, respectively.
-Tangible book value per share increased to $14.82 at September 30, 2013, compared to $14.42 and $13.85 at June 30, 2013 and September 30, 2012, respectively.
-Horizon Bank's capital ratios, including Tier 1 Capital to Average Assets Ratio of 9.13 percent and Total Capital to Risk Weighted Assets Ratio of 14.09 percent as of September 30, 2013, continue to be well above the regulatory standards for well-capitalized banks.
Craig M. Dwight, Chairman and CEO, commented: "During the past several quarters, we believe results from all five of our core banking revenue sources have been nothing short of exceptional. Our strategy is to generate balanced results in a variety of economic and market conditions. While the anticipated slowdown in residential mortgage refinancings led to less income from mortgage warehousing and gains on sale of mortgage loans, the growth of business loans and commercial banking services, purchase money mortgage originations and investment management activities generated meaningful core growth."
During the third quarter of 2013, the Company continued investing in markets with strong growth potential to complement the Company's current growth markets of Kalamazoo, MI and Indianapolis, IN. During the third quarter of 2013, the Company made an offer to purchase land in Fishers, IN, a suburb northeast of Indianapolis and east of Carmel, IN. This location complements the planned Carmel office and existing downtown Indianapolis loan production office by continuing to build the Company's overall presence in the Indianapolis region. A team for the previously announced Carmel location began to take shape in the third quarter of 2013 with the hiring of a senior lender, who will serve as group manager, and a second commercial lender. Additionally, the Company hired a senior lender in the third quarter of 2013 who will build a loan production team in Grand Rapids, MI, 50 miles north of Kalamazoo.
"Our growth strategy starts with identifying and hiring exceptional advisors and continuing our investment in markets with significant growth potential," Dwight explained. "Our investment in the Carmel and Fishers markets will continue to build our presence in vibrant communities with tremendous economic prospects for the Company."
"The Company's entry into Grand Rapids, MI, the state's second largest city, will be led by our recently hired market leader who is tasked with building a loan production team similar to our investments in both Indianapolis and Kalamazoo. We believe the upfront costs associated with these market entries are well worth the investment as evidenced by the significant growth we have achieved in Indianapolis and Kalamazoo."
In addition to new market entries, the Company continues to capitalize on strategic opportunities within the existing branch footprint as evidenced by the hiring of two seasoned commercial lenders in Northwest Indiana. "These additions strengthen the Company’s presence in Lake and Porter Counties, Indiana and will enable the Company to capitalize on the business activity in these markets," Dwight explained.
Non-interest bearing deposits increased 6.8% to $223.4 million at September 30, 2013 compared to $209.2 million at December 31, 2012, reflecting the growth in the number of small and mid-sized business banking relationships. Interest bearing transaction accounts increased 6.0% to $816.2 million at September 30, 2013 compared to $769.8 million at December 31, 2012.
Income Statement Highlights
Net income for the third quarter of 2013 decreased 1.3% to $4.8 million or $.52 diluted earnings per share, compared to $4.9 million or $.54 diluted earnings per share in the third quarter of 2012. The decrease in net income for the third quarter primarily reflects the decline in mortgage warehouse activity as mortgage warehouse balances decreased from $244.2 million as of September 30, 2012 to $113.6 million as of September 30, 2013 and the decrease in gain on sale of mortgage loans of $2.8 million from $4.4 million in the third quarter of 2012 to $1.7 million in the third quarter of 2013.
Net income for the first nine months of 2013 increased 9.7% to $15.8 million or $1.72 diluted earnings per share, compared to $14.4 million or $1.75 diluted earnings per share for the first nine months of 2012. The decline in earnings per share reflects the increase in weighted average diluted shares outstanding resulting from the Heartland acquisition, which occurred during the third quarter of 2012.
The Company’s net interest margin was 3.78% during the three-month period ended September 30, 2013, compared with 3.79% for the three-month period ending September 30, 2012 and down 43 basis points from the three-month period ending June 30, 2013. Interest income during the third quarter of 2013 compared to the same period in 2012 included approximately $1.0 million of interest income from Heartland loan valuation discounts recognized at the time of acquisition being accreted and discounts recognized from loans paying off. Excluding the interest income recognized from the loan discounts, the margin would have been 3.52% for the three-month period ending September 30, 2013. The decrease in net interest margin of 43 basis points from June 30, 2013 primarily reflected a decrease of $1.4 million in interest from loan discounts being accreted and discounts recognized from loans paying off and a reduction in mortgage warehouse activity in the third quarter of 2013 compared to the second quarter