Double digit percentage increases in core net income populate the first quarter spreadsheet for Michigan City-based Horizon Bancorp which has Horizon Bank branches scattered across Michigan’s Great Southwest and Northwest Indiana, beating Wall Street analyst expectations on all counts. The bank holding company reported at mid-week that their first-quarter profit checked in at $10.8-million, on earnings of 28-cents per share, or, when adjusted for one-time gains and costs, came to 34 cents per share.
The street had average estimated earnings pegged at 32-cents per share. With analysts anticipating revenues of $41.9-million, the bank posted actual revenues of $54.1 million in the first quarter. The revenue net of interest expense was $43 million.
Thanks to ongoing performance like the bank scored in the first quarter, the company’s shares have risen by nearly 3-percent since the beginning of the year.
Here’s a summary of the first quarter highlights provided by Horizon:
- On March 26, 2019, Horizon announced the completion of the previously announced acquisition of Salin Bancshares, Inc. and its wholly-owned subsidiary, Salin Bank and Trust Company, headquartered in Indianapolis. The 2019 first quarter results include merger related expense of approximately $3.4 million, after tax.
- Net income for the quarter ended March 31, 2019 decreased 15.5-percent to $10.8 million, or $0.28 diluted earnings per share, compared to $12.8 million, or $0.33 diluted earnings per share for the quarter ended March 31, 2018.
- Core net income for the quarter ended March 31, 2019 increased 16.5-percent to $13.0 million, or $0.34 diluted earnings per share, compared to $11.2 million, or $0.29 diluted earnings per share, for the same period in 2018. That represents the highest quarter-to-date core net income and core diluted earnings per share in the company’s history.
- Return on average assets was 1.02-percent for the first quarter of 2019 compared to 1.32-percent for the first quarter of 2018.
- Core return on average assets for the first quarter of 2019 was 1.23-percent compared to 1.15-percent for the first quarter of 2018.
- Total loans, excluding acquired loans, increased by an annualized rate of 5-percent, or $36.8 million, during the first quarter of 2019.
- Net interest margin was 3.62-percent for the three months ended March 31, 2019 compared to 3.60-percent for the three months ended December 31, 2018 and 3.81-percent for the three months ended March 31, 2018.
- Core net interest margin (defined as net interest margin excluding acquisition-related purchase accounting adjustments) was 3.46-percent for the three months ended March 31, 2019 compared to 3.43-percent for the three months ended December 31, 2018 and 3.55-percent for the three months ended March 31, 2018.
- Horizon’s tangible book value per share increased to $9.60 at March 31, 2019 compared to $9.43 and $8.57 at December 31, 2018 and March 31, 2018, respectively. That represents the highest tangible book value per share in the company’s history.
- Horizon was slated to close three full-service branches on April 19, 2019 and one loan production office today, April 26, 2019.
- Horizon to consolidate five Salin full-service branches today, April 26, 2019 in coordination with the core data conversion.
Craig Dwight, Chairman and CEO of Horizon, says: “Horizon’s 2019 first quarter earnings of $10.8 million, or $0.28 per diluted share, includes approximately $3.4 million, after tax, in merger expenses related to the acquisition of Salin Bancshares, Inc. which was completed on March 26, 2019. Excluding these merger expenses and other non-core items, Horizon’s core net income totaled $13.0 million, or $0.34 diluted earnings per share. This represents an increase in core diluted earnings per share of 3.0-percent and 17.2-percent when compared to the fourth and first quarters of 2018, respectively.”
Dwight adds, “Horizon’s total assets at March 31, 2019 surpassed $5.0 billion, as a result of the Salin acquisition and organic loan growth since the beginning of the year. In addition to approximately $571.8 million in loans acquired from Salin, we also experienced organic loan growth at an annualized rate of 5.0-percent during the first quarter of 2019. The markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo continue to experience solid growth with an increase in loan balances of $77.7 million, or 11.5-percent, during the first quarter of 2019. This growth is due to the credit of our seasoned lending team who live and work within these expanding and robust communities that we serve.”
Dwight shared the bank’s vision, noting, “Horizon’s strategy to build mass and scale in order to maximize operational leverage is working as we continue to experience lower costs as a percent of average assets. Excluding merger expenses, we reduced total non-interest expenses by $10,000 and $217,000 when comparing the first quarter of 2019 to the fourth and first quarters of 2018. This decrease in expenses is the result of focus by our entire team to pursue operational efficiencies and leverage new technologies. In addition, the acquisition of Salin continues our efforts to maximize operational leverage through mass and scale. As part of our strategy to improve efficiencies, we will close three legacy full-service branches on April 19, 2019 and will consolidate our existing Fort Wayne loan production office with the acquired Salin locations. In addition, we plan to close five Salin full-service branches which are in close proximity to an existing Horizon office or that do not meet our branch hurdle rates. The Salin branches will close in conjunction with our data conversion on April 26, 2019.”
Dwight concluded, “Our merger with Salin provides entry into the attractive growth markets of Fort Wayne and Columbus, Indiana and complements our current Indiana locations. Salin Bank’s presence in the dynamic markets of Indianapolis and Lafayette, Indiana will add to Horizon’s current footprint. In addition, Salin has a talented team who will add depth and experience to our current sales, call center and operational network. Horizon’s strategic plan calls for continued expansion in the States of Indiana and Michigan with an emphasis on strong core deposit growth, investment in growth markets and to add mass and scale to gain additional efficiencies. Horizon’s merger with Salin fits well with our strategic plan.”
Dwight also reports that throughout 2019, Horizon plans to cast a wider net to maximize merger opportunities and in order to seek lower cost funding by including Central Illinois and Northwest Ohio. Those markets complement Horizon’s current Indiana and Michigan markets and will assist in the bank’s strategy to build shareholder value.
