Saying the company closed out 2020 with “record quarterly top — and bottom-line — results,” Horizon Bancorp. Chairman & CEO Craig Dwight points to “clear opportunities to enhance the bank’s operating efficiency” in the year ahead, as he reports quarterly and annual finances.
Dwight and Horizon Bancorp, Inc. announced unaudited financial results Wednesday for the three and twelve month periods ending December 31, 2020.
From corporate headquarters in Michigan City, Dwight says, “Horizon closed 2020 with record quarterly top– and bottom–line results, supported by continued strength in mortgage lending and other fee–generating businesses, the benefits of our work to deleverage and optimize returns on total earning assets, and favorable deferral trends and credit quality metrics.”
Horizon, which has branches throughout Michigan’s Great Southwest, earned record net income of $21.9 million, or $0.50 diluted earnings per share, compared to $20.3 million, or $0.46 diluted earnings per share, for the third quarter of 2020 and $18.5 million, or $0.41 diluted earnings per share, for the fourth quarter of 2019.
Dwight went on to say, “Entering the new year with strong liquidity, capital, and reserves, we see clear opportunities to enhance the bank’s operating efficiency, deepen in–market retail and commercial customer relationships, and help to strengthen our resilient Indiana and Michigan communities in 2021.”
Here are other Fourth Quarter 2020 Highlights from Horizon:
- Grew pre–tax, pre–provision net income to a record $26.9 million for the quarter, compared to $26.7 million for the third quarter of 2020 and $22.8 million for the fourth quarter of 2019. This non–GAAP financial measure is utilized by banks to provide a greater understanding of pre–tax profitability before giving effect to credit loss expense.
- Grew net interest income to a record $43.6 million for the quarter, compared to $43.4 million for the third quarter of 2020 and $41.5 million for the fourth quarter of 2019. Adjusted net interest income for the quarter was $45.0 million compared to $41.9 million for the third quarter of 2020.
- Reported return on average assets (“ROAA”) of 1.49-percent and return on average common equity (“ROACE”) of 12.79-percent in the quarter, as well as adjusted ROAA of 1.56-percent and adjusted ROACE of 13.33-percent, excluding the impact of gains on sale of investment securities and prepayment penalties on borrowings, net of tax.
- Grew mortgage–related non–interest income by 8.5-percent from the linked quarter and 138.6-percent from the prior year period, with gain on mortgage loan sales of $7.8 million and net mortgage servicing income of $327,000. The bank originated $186.1 million in mortgage loans during the quarter, down 10.1-percent from the third quarter of 2020 and up 63.3-percent from the fourth quarter of 2019.
- Total non–interest income, excluding securities gains, grew to a record $17.1 million, up 9.6-percent from the linked quarter and 43.5-percent from the prior year period, supported by increases in mortgage–related gains and servicing income, banking and fiduciary fees.
- Reported net interest margin (“NIM”) of 3.34-percent and adjusted NIM of 3.44-percent, with reported NIM declining by 5 basis points and adjusted NIM increasing by 17 basis points from the third quarter of 2020. An estimated 18 basis points attributed to PPP lending improved the margin, offset by an estimated 10 and 7 basis point compression, respectively, attributed to the subordinated notes and excess liquidity held during the quarter, for both NIM and adjusted NIM.
- Increased the allowance for credit losses (“ACL”) by 1.3-percent during the quarter and 222.8-percent year–to–date to $57.0 million at period end, representing 1.47-percent of total loans, reflecting January 2020 implementation of the Current Expected Credit Losses (“CECL”) accounting method and prudent increases in the allocation for the company’s identified stressed portfolios. ACL at period end also represented 1.55-percent of loans excluding $208.9 million in Federal Paycheck Protection Program (“PPP”) loans, and 212.7-percent of non–performing loans.
- COVID–19 deferral levels improved to 3.5-percent of total loans at period end, compared to 4.1-percent on September 30, 2020 and 14.3-percent on June 30, 2020 and the bank experienced no material specific loan losses attributed to COVID–19 closures in 2020.
- Maintained solid asset quality metrics, including non–performing and delinquent loans representing 0.69-percent and 0.19-percent of total loans, respectively, at December 31, 2020, while net charge–offs were 0.01-percent of average loans for the period.
- The efficiency ratio for the period was 57.54-percent compared to 55.59-percent for the third quarter of 2020. The adjusted efficiency ratio was 56.48-percent compared to 56.64-percent for the third quarter of 2020.
- Horizon’s tangible book value per share increased from $10.63 at December 31, 2019 to $11.78 at December 31, 2020, which includes the accounting adjustment for CECL as of January 1, 2020. This represents the highest tangible book value per share in the company’s history.
- Maintained strong liquidity position including approximately $1.6 billion in cash and investment securities, which is approximately 26.3-percent of total assets, and approximately $1.0 billion in unused availability on lines of credit, at December 31, 2020.
- Horizon has reported over thirty years of uninterrupted dividends and as of year–end had in excess of $127 million in cash at the holding company, which provides us with considerable future optionality to build shareholder value.
