Horizon Bancorp's earnings shrank by 35 percent during the first quarter, as a result of a slowdown in residential mortgage lending.
The parent company of Michigan City-based Horizon Bank reported a net income of $3.4 million during the first quarter, as compared to $5.3 million during the same period the previous year.
Horizon made 38 cents in diluted earning per share, and would have earned 40 cents per share if not for costs related to the acquisition of East Lansing, Michigan-based Summit Community Bank. The deal closed on April 3.
The bank is looking to further grow in central Indiana after buying land in Carmel and Fishers, where it plans to build two full-service branches. Horizon is currently looking for experienced bankers to help launch the Fishers branch.
"We are very pleased to continue Horizon's growth story this quarter by achieving solid loan and core deposit growth despite the highly competitive environment and tepid economic recovery," said chairman and CEO Craig Dwight. "This growth speaks to the quality and dedication of our team to expand existing client relationships and source new business opportunities."
Commercial lending increased by $23.4 million to $528.6 million in the first three months, which is an increase of 18.6 percent on an annualized basis. Nearly 47 percent of the Horizon's loan growth occurred in the new markets of Indianapolis and Kalamazoo. Horizon also recently completed a purchase of 1st Mortgage of Indiana in Indianapolis.
Despite its growth, Horizon suffered from a steep drop-off in mortgage loan income, which fell to $1.4 million in the first quarter, a decline of $1.7 million from the first quarter of 2013. Origination volume dropped to $52.6 million, a 22 percent decline from the fourth quarter and a 41.2 percent decrease from the first quarter of 2013.
"The slowdown in residential mortgage lending negatively impacted our results in the first quarter of 2014, continuing to validate Horizon's four balanced revenue streams – business banking, retail banking, residential mortgage lending and wealth and investment management," Dwight said. "In anticipation of the residential mortgage lending slowdown, we made significant investments in new market entries, employee talent, commitment to customer service guarantees and technology to provide the best in class service to our customers. Our results this quarter illustrate these investments are paying off."