Horizon Bancorp announces balance sheet restructuring transaction
Horizon Bancorp announced a series of balance sheet restructuring transactions aimed at improving its overall financial position, including an increase in net interest margin, return on average assets, and return on average equity. The transactions include prepaying $106M of high fixed-rate borrowings with contractual maturities ranging from June 2017 through September 2020 and repositioning the investment securities portfolio to replace certain lower yielding short-term investments consistent with a more normalized strategy and maturity periods. The debt prepayment was funded from the sale of available-for-sale investment securities of $168.0M. The company realized a loss of $4.8M from the early redemption of the debt. This loss was partially offset by an expected net gain on the sale of investment securities of $966K. The average yield on the investment securities sold to fund the debt prepayment is 1.94%. The average cost of the fixed rate borrowings that were repaid was 3.58%. The average yield on the $62.0M of purchased securities is expected to be 3.94%. In addition, the company estimates that it will add approximately 27 basis points to its margin related to the repositioning of low-yielding short-term investments and the debt repayment. This deleveraging strategy is still in process and is expected to be completed by the end of Q4.