Even record net income for the year wasn’t enough to overcome Wall Street expectations for Horizon Bancorp which owns and operates Horizon Bank, featuring multiple locations around Michigan’s Great Southwest and Northwest Indiana. With 4th quarter profit at $7.7-million, and earnings of 30-cents per share, adjusted for non-recurring costs to 40-cents per share, the results fell short of analysts expectations which had been established at 43-cents per share.
Nevertheless, Horizon Chairman & CEO Craig Dwight says, “Horizon’s performance for the year required an incredible team effort, based on the fact that we reported solid organic loan growth and successfully closed on a single branch acquisition and two whole-banks mergers. In addition, we were able to improve our net interest margin as a result of changes we made to our balance sheet in the fourth quarter of 2016 and therefore realized the benefits of said changes in 2017. Horizon’s core net income of $10.1 million for the fourth quarter and $35.5 million for the year is an increase of 19.0-percent and 21.4-percent, respectively, when compared to the prior year. Core diluted earnings per share increased 5.3-percent, to $0.40, for the fourth quarter and 5.5-percent, to $1.53, for 2017 when compared to the prior year.”
Dwight notes, “We continued to follow our balanced strategy of well-executed acquisitions and organic growth throughout 2017. During the first quarter of 2017, Horizon completed the acquisition of a single branch of First Farmers Bank & Trust Company located in Bargersville, Indiana which added $3.4 million in loans and $14.8 million in deposits and enhanced our presence in this attractive and rapidly growing central Indiana market. During the third quarter of 2017, we completed the acquisition of Lafayette Community Bancorp adding an experienced team of bankers to capitalize on future opportunities in the growth market of Lafayette, Indiana. Horizon also completed the acquisition of Wolverine Bancorp, Inc. during the fourth quarter of 2017 adding another experienced team of bankers located at three full-service locations in the Great Lakes Bay Region of Michigan and a loan production office in Troy, Michigan. The acquisitions of Lafayette and Wolverine increased total loans by $445.0 million.”
Dwight concluded, “In addition to these acquisitions, we continued to execute our organic growth strategy and experienced solid loan growth in 2017. Total loans, excluding acquired loans, loans held for sale and mortgage warehouse loans increased by 14.4-percent, or $288.9 million, primarily due to commercial and consumer loan growth. Horizon’s growth markets of Fort Wayne, Grand Rapids, Indianapolis and Kalamazoo, grew by $109.1 million, or 27.5-percent, during the year. The addition of a seasoned consumer loan portfolio manager during the third quarter of 2016 and an increased focus on the management of direct consumer loans resulted in an increase of 26.3% in consumer loans during 2017.”
Net income for the fourth quarter of 2017 was $7.6 million, or $0.30 diluted earnings per share, compared to $8.2 million, or $0.36 diluted earnings per share, for the third quarter of 2017 and $5.6 million, or $0.25 diluted earnings per share, for the fourth quarter of 2016. Excluding acquisition-related expenses, gain on sale of investment securities, prepayment penalties on borrowings, gain on the accounting for Horizon’s equity interest in Lafayette, tax reform bill impact and purchase accounting adjustments (“core net income”), net income for the fourth quarter of 2017 was $10.1 million, or $0.40 diluted earnings per share, compared to $9.2 million, or $0.41 diluted earnings per share, for the third quarter of 2017 and $8.5 million, or $0.38 diluted earnings per share, for the fourth quarter of 2016.
The decrease in net income from the third quarter of 2017 to the fourth quarter of 2017 reflects increases in income tax expense of $3.3 million, non-interest expense of $1.8 million and provision for loan losses of $390,000, partially offset by increases in net interest income of $3.6 million and non-interest income of $1.3 million. In addition to the decrease in net income, diluted earnings per share decreased due to the stock issued in the Lafayette and Wolverine acquisitions. The increase in income tax expense was primarily due to the $2.4 million adjustment of Horizon’s net deferred tax assets to the new corporate tax rate. The increase in non-interest income reflects the finalized entries of the Lafayette acquisition which resulted in a gain on the accounting for Horizon’s previous equity interest in Lafayette of $530,000. Also, fiduciary activities income increased $255,000 from the third quarter to the fourth quarter.
