• Horizon Bancorp, Inc. Announces Record Earnings for 2022

    Source: Nasdaq GlobeNewswire / 25 Jan 2023 15:35:02   America/Chicago

    MICHIGAN CITY, Ind., Jan. 25, 2023 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) — Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three and twelve months ended December 31, 2022.

    “Horizon closed 2022 with record annual earnings reflecting continued strong growth in commercial and consumer loans through the fourth quarter, solid asset quality metrics and continued disciplined expense management,” Chairman and CEO Craig M. Dwight said. “We have continued to produce consistent and strong returns with ROAA of 1.24% and ROATE of 18.33% for 2022. As we enter 2023, we believe we are well–positioned with talent, technology and solid pipelines to continue to support our loan growth goals for the year, and focus on reinvesting our cash flows into higher yielding assets. Our well diversified balance sheet and low credit risk profile has performed well through previous economic cycles and, given the strong markets we operate in, we expect similar performance throughout the current economic cycle.”

    Fourth Quarter and Full Year 2022 Highlights

    • Return on average assets (“ROAA”) was 1.24% for the year ended 2022.

    • Return on average tangible equity was 18.33% for the year ended 2022.

    • Total loans grew 13.4% year–to–date and 12.8% annualized during the fourth quarter.

    • Commercial loans grew to a record $2.42 billion, up 13.4% year–to–date and 10.8% annualized during the fourth quarter.

    • Consumer loans grew to a record $967.8 million, up 30.6% year–to–date and 21.0% annualized during the fourth quarter.

    • Asset quality remained solid with total loan delinquency at 0.26% of total loans, net charge–offs to average loans of 0.01% and non–performing loans to total loans at 0.52%.

    • Total deposits remained strong increasing $26.9 million during the quarter at an average cost of 71 basis points and $54.8 million year–to–date at an average cost of 30 basis points.

    • Fourth quarter net interest income was $48.8 million compared to $51.9 million in the previous quarter. Lower loan fees, less purchase accounting accretion and higher dealer reserve amortization represented $2.2 million of this decrease.

    • An accounting revision was made to amounts reported in previously issued financial statements covering the third quarter of 2022 related to immaterial errors discovered in the fourth quarter of 2022. The errors relate to the inclusion of the dealer reserve amortization expense in loan expense in non–interest expenses for the third quarter of 2022 rather than loan interest income. The previously issued financial statements for the three and nine months dated September 30, 2022 have been revised to correct this error, which resulted in lowering both interest income and non–interest expense by $1.5 million for the quarter and lowering net interest margin by ten basis points from the historical presentation of these amounts (See Exhibit 1 – Revision of Previously Issued Financial Statements for details). All periods presented reflect this adjustment, and there was no impact to net income.

    • Non–interest income increased by 4.8% from $10.2 million to $10.7 million from the third quarter to the fourth quarter of 2022.

    • Non-interest expense was $35.7 million in the quarter, or 1.84% of average assets on an annualized basis, compared to $36.8 million, or 1.91%, in the third quarter of 2022. Year–to–date non–interest expense continued to be well managed at $143.2 million, or 1.90% of average assets.

    • Net income totaled $21.2 million, compared to $23.8 million in the third quarter and $21.4 million in the prior year period. Diluted earnings per share (“EPS”) was $0.48 compared to $0.55 for the third quarter of 2022 and $0.49 for the fourth quarter of 2021.

    • The Bank’s capital position continues to be robust with leverage and risk based capital ratios of 9.55% and 13.59%, respectively. The annualized dividend yield was 4.24% as of December 31, 2022.

    Summary

      For the Three Months Ended
      December 31, September 30, December 31,
    Net Interest Income and Net Interest Margin  2022   2022   2021 
    Net interest income $48,782  $51,861  $48,477 
    Net interest margin  2.85%  3.04%  2.87%
    Adjusted net interest margin  2.83%  2.99%  2.77%

    “Horizon's net interest income of approximately $48.8 million in the fourth quarter was a reduction from the third quarter due to rapidly rising short term interest rates, some lag in repricing adjustable rate loans and lower fee and non–interest related income. In addition, Horizon's deposit betas increased at a faster pace in the fourth quarter due to the magnitude and velocity of the Federal Reserve Bank's Open Market Committee raising the targeted federal funds rate. We expect funding costs to stabilize in 2023 as the Federal Reserve Bank tempers the velocity of future rate increases,” Mr. Dwight commented.

      For the Three Months Ended
      December 31, September 30, December 31,
    Asset Yields and Funding Costs 2022  2022  2021 
    Interest earning assets 3.88% 3.58% 3.11%
    Interest bearing liabilities 1.29% 0.69% 0.31%


      For the Three Months Ended
    Non–interest Income and  December 31, September 30, December 31,
    Mortgage Banking Income  2022  2022  2021
    Total non–interest income $10,674 $10,188 $12,828
    Gain on sale of mortgage loans  1,196  1,441  4,167
    Mortgage servicing income net of impairment  637  355  300


      For the Three Months Ended
      December 31, September 30, December 31,
    Non–interest Expense  2022   2022   2021 
    Total non–interest expense $35,711  $36,816  $37,871 
    Annualized non–interest expense to average assets  1.84%  1.91%  2.01%


      For the Three Months Ended
      December 31, September 30, December 31,
    Credit Quality 2022  2022  2021 
    Allowance for credit losses to total loans 1.21% 1.27% 1.48%
    Non–performing loans to total loans 0.52% 0.47% 0.52%
    Percent of net charge–offs to average loans outstanding for the period 0.01% 0.00% 0.04%


    Allowance for December 31, Net Reserve December 31,
    Credit Losses  2022  4Q22 3Q22 2Q22 1Q22  2021 
    Commercial $32,445  $(1,361) $(996) $(2,987) $(2,986) $40,775 
    Retail Mortgage  5,577   440   715   71   495   3,856 
    Warehouse  1,020   (4)  (43)  12   (4)  1,059 
    Consumer  11,422   20   (657)  2,746   717   8,596 
    Allowance for Credit Losses (“ACL”) $50,464  $(905) $(981) $(158) $(1,778) $54,286 
    ACL / Total Loans  1.21%          1.48%
    Acquired Loan Discount (“ALD”) $6,279  $(308) $(619) $(1,122) $(769) $9,097 

    “We continued to report solid asset quality metrics, including low net charge–offs and modest levels of non–performing loans to total loans. Asset quality continued to remain a hallmark of our franchise and a credit to our seasoned loan underwriters”, said Mr. Dwight.

    Exhibit 1 – Revision of Previously Issued Financial Statements

    We have revised amounts reported in previously issued financial statements for our third quarter 2022 results reflected in this press release related to immaterial errors. Subsequent to the third quarter of 2022, the Company’s management determined that the dealer reserve amortization expense was incorrectly included in loan expense in non–interest expenses rather than loan interest income. In addition, the dealer reserve asset was incorrectly included with other assets on the balance sheet rather than included with loans. As a result, loan interest income for the three and nine months ended September 30, 2022 has been revised to include dealer reserve amortization expense, and we have reversed the impact of the inclusion of the dealer reserve amortization expense in loan expense in non–interest expenses for the three and nine months ended September 30, 2022 and for all other prior periods presented. This revision for the third quarter reduced both loan interest income and loan expense by $1.5 million, and lowered the net interest margin by ten basis points from the amounts previously reported in the interim condensed consolidated statements of income for the three and nine months ended September 30, 2022. Our financial statements for the quarter and year ended December 31, 2022 and December 31, 2021 set forth in this press release reflect the inclusion of the dealer reserve amortization expense in loan interest income for those periods.

    We evaluated the aggregate effects of the errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No. 99 and No. 108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in our Quarterly Reports on Form 10–Q for the quarterly period ended September 30, 2022.

      Three Months Ended
      December 31, December 31,
       2022   2021 
      Without
    Dealer
    Reserve
    Change    		 Dealer
    Reserve
    Change    		 Actual Pre
    Revision    		 Revision Post
    Revision
    Balance Sheet            
    Loans, net of allowance for credit losses $4,089,370  $18,164  $4,107,534  $3,590,331  $13,917  $3,604,248 
    Other assets  157,445   (18,164)  139,281   80,753   (13,917)  66,836 
    Total assets  7,872,518   —   7,872,518   7,411,889   —   7,411,889 
                 
    Income Statement            
    Interest income  69,211   (2,024)  67,187   54,118   (1,499)  52,619 
    Net interest income  50,806   (2,024)  48,782   49,976   (1,499)  48,477 
    Non–interest expense  37,735   (2,024)  35,711   39,370   (1,499)  37,871 
    Net income  21,165   —   21,165   21,425   —   21,425 
                 
    Average Balance Sheet            
    Loans  4,019,744   18,912   4,038,656   3,630,896   13,792   3,644,688 
    Interest earning assets  7,073,068   18,912   7,091,980   6,938,258   13,792   6,952,050 
    Other assets  599,786   (18,912)  580,874   477,352   (13,792)  463,560 
    Total assets $7,718,366  $—  $7,718,366  $7,461,343  $—  $7,461,343 
                 
    Other Financial Information            
    Average rate on loans  5.22%  (0.20)%  5.02%  4.52%  (0.18)%  4.34%
    Average rate on interest earning assets  4.01   (0.13)  3.88   3.20   (0.09)  3.11 
    Net interest spread  2.72   (0.13)  2.59   2.89   (0.09)  2.80 
    Net interest margin  2.97   (0.12)  2.85   2.97   (0.10)  2.87 
    Efficiency ratio  61.38   (1.32)  60.06   62.69   (0.92)  61.77 
    Non–interest expense to average assets  1.94%  (0.10)%  1.84%  2.09%  (0.08)%  2.01%


      Twelve Months Ended
      December 31, December 31,
       2022   2021 
      Without
    Dealer
    Reserve
    Change    		 Dealer
    Reserve
    Change    		 Actual Pre
    Revision    		 Revision Post
    Revision
    Balance Sheet            
    Loans, net of allowance for credit losses $4,089,370  $18,164  $4,107,534  $3,590,331  $13,917  $3,604,248 
    Other assets  157,445   (18,164)  139,281   80,753   (13,917)  66,836 
    Total assets  7,872,518   —   7,872,518   7,411,889   —   7,411,889 
                 
    Income Statement            
    Interest income  241,895   (5,862)  236,033   199,995   (5,885)  194,110 
    Net interest income  205,380   (5,862)  199,518   181,690   (5,885)  175,805 
    Non–interest expense  149,063   (5,862)  143,201   139,279   (5,885)  133,394 
    Net income  93,408   —   93,408   87,091   —   87,091 
                 
    Average Balance Sheet            
    Loans  3,828,090   17,047   3,845,137   3,626,033   13,421   3,639,454 
    Interest earning assets  6,960,360   17,047   6,977,407   6,021,740   13,421   6,035,161 
    Other assets  526,276   (17,047)  509,229   459,316   (13,421)  445,895 
    Total assets $7,533,915  $—  $7,533,915  $6,514,251    $6,514,251 
                 
    Other Financial Information            
    Average rate on loans  4.70%  (0.17)%  4.53%  4.47%  (0.17)%  4.30%
    Average rate on interest earning assets  3.60   (0.10)  3.50   3.43   (0.10)  3.33 
    Net interest spread  2.93   (0.10)  2.83   3.03   (0.10)  2.93 
    Net interest margin  3.07   (0.09)  2.98   3.13   (0.10)  3.03 
    Efficiency ratio  58.96   (0.98)  57.98   58.12   (1.05)  57.07 
    Non–interest expense to average assets  1.98%  (0.08)%  1.90%  2.14%  (0.09)%  2.05%

    Income Statement

    Net income for the fourth quarter of 2022 was $21.2 million, or $0.48 diluted earnings per share, compared to $23.8 million, or $0.55, for the linked quarter and $21.4 million, or $0.49, for the prior year period.

    The change in net income for the fourth quarter of 2022 when compared to the third quarter of 2022 reflects an increase in non–interest income of $486,000 and a decrease in non–interest expense of $1.1 million, offset by a decrease in net interest income of $3.1 million and an increase in credit loss expense of $532,000.

    Non–interest expense of $35.7 million in the fourth quarter of 2022 reflected a $635,000 decrease in salaries and employee benefits, a $400,000 decrease in other expense, a $282,000 decrease in FDIC insurance expense and a $280,000 decrease in other losses, offset by a $345,000 increase in data processing expense and a $142,000 increase in professional fees from the linked quarter.

    Net income for the fourth quarter of 2022 when compared to the same prior year period reflects a decrease in non–interest income of $2.2 million and an increase in credit loss expense of $2.0 million, offset by a decrease in non–interest expense of $2.2 million, a decrease in income tax expense of $1.4 million and an increase in net interest income of $305,000.

    Net income for the year ended December 31, 2022 was $93.4 million, or $2.14 diluted earnings per share, compared to $87.1 million, or $1.98 diluted earnings per share, for the year ended December 31, 2021. Adjusted net income for the year ended December 31, 2022 was $92.8 million, or $2.13 diluted earnings per share, compared to $88.6 million, or $2.00 diluted earnings per share, for the year ended December 31, 2021. The increase in net income for the year ended December 31, 2022 when compared to the same prior year period reflects an increase in net interest income of $23.7 million and a decrease in income tax expense of $3.2 million, offset by an increase in non–interest expense of $9.8 million, a decrease in non–interest income of $10.5 million and an increase in credit loss expense of $268,000.

    Net Interest Margin

    Horizon’s net interest margin was 2.85% for the fourth quarter of 2022 compared to 3.04% for the third quarter. The decrease in net interest margin reflects an increase in the cost of interest bearing liabilities of 60 basis points, offset by an increase in the yield on interest earning assets of 42 basis points. Additionally, interest income from acquisition–related purchase accounting adjustments was $475,000 lower during the fourth quarter of 2022 when compared to the third quarter of 2022.

    Horizon’s net interest margin decreased to 2.98% for the year ended December 31, 2022 compared to 3.03% for the same prior year period. The decrease in net interest margin reflects an increase in the cost of interest bearing liabilities of 27 basis points, offset by an increase in the yield on interest earning assets of 28 basis points.

    Net interest margin, excluding acquisition–related purchase accounting adjustments (“adjusted net interest margin”), was 2.83% for the fourth quarter of 2022, compared to 2.99% for the linked quarter and 2.77% for the fourth quarter of 2021. Interest income from acquisition–related purchase accounting adjustments was $431,000, $906,000 and $1.8 million for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

    The adjusted net interest margin was 2.93% for the year ended December 31, 2022 compared to 2.96% for the same prior year period. Interest income from acquisition–related purchase accounting adjustments was $3.5 million and $4.5 million for the year ended December 31, 2022 and 2021, respectively.

    Lending Activity

    Total loan balances were $4.16 billion, or $4.11 billion excluding PPP loans and sold commercial participation loans, on December 31, 2022 compared to $4.03 billion, or $3.98 billion excluding PPP loans and sold commercial participation loans, on September 30, 2022. During the three months ended December 31, 2022, commercial loans, excluding PPP loans and sold commercial participation loans, increased $63.8 million, consumer loans increased $48.6 million, residential mortgage loans increased $18.4 million, and loans held for sale increased $4.0 million, offset by a decrease in mortgage warehouse loans of $4.2 million.

    Loan Growth by Type
    (Dollars in Thousands, Unaudited)
     December 31, September 30, QTD QTD Annualized
      2022  2022 $ Change % Change % Change
    Commercial, excluding PPP loans and sold commercial participation loans$2,416,249 $2,352,446 $63,803  2.7% 10.8%
    PPP loans 217  315  (98) (31.1)% (123.4)%
    Sold commercial participation loans 50,956  50,982  (26) (0.1)% (0.2)%
    Residential mortgage 653,292  634,901  18,391  2.9% 11.5%
    Consumer 967,755  919,198  48,557  5.3% 21.0%
    Subtotal 4,088,469  3,957,842  130,627  3.3% 13.1%
    Loans held for sale 5,807  1,852  3,955  213.6% 847.2%
    Mortgage warehouse 69,529  73,690  (4,161) (5.6)% (22.4)%
    Total loans$4,163,805 $4,033,384 $130,421  3.2% 12.8%
              
    Total loans, excluding PPP loans and sold commercial participation loans$4,112,632 $3,982,087 $130,545  3.3% 13.0%


    Loan Growth by Type
    (Dollars in Thousands, Unaudited)
     December 31, December 31, YTD YTD
      2022  2021 $ Change % Change
    Commercial, excluding PPP loans and sold commercial participation loans$2,416,249 $2,131,644 $284,605  13.4%
    PPP loans 217  25,844  (25,627) (99.2)%
    Sold commercial participation loans 50,956  56,457  (5,501) (9.7)%
    Residential mortgage 653,292  594,382  58,910  9.9%
    Consumer 967,755  741,176  226,579  30.6%
    Subtotal 4,088,469  3,549,503  538,966  15.2%
    Loans held for sale 5,807  12,579  (6,772) (53.8)%
    Mortgage warehouse 69,529  109,031  (39,502) (36.2)%
    Total loans$4,163,805 $3,671,113 $492,692  13.4%
            
    Total loans, excluding PPP loans and sold commercial participation loans$4,112,632 $3,588,812 $523,820  14.6%

    Residential mortgage lending activity for the three months ended December 31, 2022 generated $1.2 million in income from the gain on sale of mortgage loans, decreasing $245,000 from the third quarter of 2022 and decreasing $3.0 million from the fourth quarter of 2021. Total mortgage origination volume for the fourth quarter of 2022, including loans placed into the portfolio, totaled $62.3 million, representing a decrease of 43.8% from third quarter 2022 levels, and a decrease of 58.6% from the fourth quarter of 2021. As a percentage of total mortgage loan originations, 8% of the volume was from refinancing and 92% was from new purchases during the fourth quarter of 2022. Total origination volume of loans sold to the secondary market totaled $23.0 million, compared to $50.2 million in the third quarter.

    Gain on sale of mortgage loans and mortgage warehousing income was 3.2% of total revenue for the three months ended December 31, 2022, compared to 3.8% for the linked quarter and 8.8% for the three months ended December 31, 2021.

    Deposit Activity

    Total deposit balances of $5.86 billion on December 31, 2022 increased 0.5% compared to $5.83 billion on September 30, 2022, or 1.8% annualized.

    Deposit Growth by Type
    (Dollars in Thousands, Unaudited)
     December 31, September 30, QTD QTD Annualized
     2022 2022 $ Change % Change % Change
    Non–interest bearing$1,277,768 $1,315,155 $(37,387) (2.8)% (11.3)%
    Interest bearing 3,582,891  3,736,798  (153,907) (4.1)% (16.3)%
    Time deposits 997,115  778,885  218,230  28.0% 111.2%
    Total deposits$5,857,774 $5,830,838 $26,936  0.5% 1.8%


    Total deposit balances of $5.86 billion on December 31, 2022 increased 0.9% compared to $5.80 billion on December 31, 2021.

    Deposit Growth by Type
    (Dollars in Thousands, Unaudited)
     December 31, December 31, YTD YTD
      2022  2021 $ Change % Change
    Non–interest bearing$1,277,768 $1,360,338 $(82,570) (6.1)%
    Interest bearing 3,582,891  3,711,767  (128,876) (3.5)%
    Time deposits 997,115  730,886  266,229  36.4%
    Total deposits$5,857,774 $5,802,991 $54,783  0.9%


    Expense Management

    Non–Interest Expense
    (Dollars in Thousands, Unaudited)
     Three Months Ended
     December 31,September 30,QTD QTD
    Non–interest Expense20222022$ Change % Change
    Salaries and employee benefits$19,978  $20,613  $(635) (3.1)%
    Net occupancy expenses 3,279   3,293   (14) (0.4)%
    Data processing 2,884   2,539   345  13.6%
    Professional fees 694   552   142  25.7%
    Outside services and consultants 2,985   2,855   130  4.6%
    Loan expense 1,281   1,392   (111) (8.0)%
    FDIC insurance expense 388   670   (282) (42.1)%
    Other losses 118   398   (280) (70.4)%
    Other expense 4,104   4,504   (400) (8.9)%
    Total non–interest expense$35,711  $36,816  $(1,105) (3.0)%
    Annualized non–interest expense to average assets 1.84%  1.91%    

    Total non–interest expense was $1.1 million lower in the fourth quarter of 2022 when compared to the third quarter of 2022. The decrease in expenses was primarily due to a decrease in salaries and employee benefits of $635,000 from lower commissions and health care costs, a decrease in other expense of $400,000, a decrease in FDIC insurance expense of $282,000 and a decrease in other losses of $280,000, offset by an increase in data processing of $345,000 and professional fees of $142,000.

    Non–GAAP Reconciliation of Non–Interest Expense
    (Dollars in Thousands, Unaudited)
     Three Months Ended
     December 31, December 31,  
      2022   2021  Adjusted
    Non–interest ExpenseActual Acquisition
    &
    Non–
    Recurring
    Expenses    		 Adjusted Actual Acquisition
    &
    Non–
    Recurring
    Expenses    		 Adjusted Amount
    Change    		 Percent
    Change
    Salaries and employee benefits$19,978  $— $19,978  $20,549  $(202) $20,347  $(369) (1.8)%
    Net occupancy expenses 3,279   —  3,279   3,204   —   3,204   75  2.3%
    Data processing 2,884   —  2,884   2,672   (1)  2,671   213  8.0%
    Professional fees 694   —  694   562   (45)  517   177  34.2%
    Outside services and consultants 2,985   —  2,985   2,197   (162)  2,035   950  46.7%
    Loan expense 1,281   —  1,281   1,304   (83)  1,221   60  4.9%
    FDIC insurance expense 388   —  388   798   (6)  792   (404) (51.0)%
    Other losses 118   —  118   1,925   (1,904)  21   97  461.9%
    Other expense 4,104   —  4,104   4,660   (381)  4,279   (175) (4.1)%
    Total non–interest expense$35,711  $— $35,711  $37,871  $(2,784) $35,087  $624  1.8%
    Annualized non–interest expense to average assets 1.84%    1.84%  2.01%    1.87%    

    Total adjusted non–interest expense was $624,000 higher in the fourth quarter of 2022 when compared to the fourth quarter of 2021. The increase in expenses was primarily due to an increase in outside services and consultants of $950,000 and an increase in data processing of $213,000, offset by a decrease in salaries and employee benefits of $369,000, a decrease in FDIC insurance expense of $404,000 and a decrease in other expense of $175,000.

    Non–GAAP Reconciliation of Non–Interest Expense
    (Dollars in Thousands, Unaudited)
     Twelve Months Ended
     December 31, December 31,    
      2022   2021  Adjusted
    Non–interest ExpenseActual Acquisition
    &
    Non–Recurring
    Expenses    		 Adjusted Actual Acquisition
    &
    Non–Recurring
    Expenses    		 Adjusted Amount
    Change    		 Percent
    Change
    Salaries and employee benefits$80,283  $— $80,283  $74,051  $(227) $73,824  $6,459  8.7%
    Net occupancy expenses 13,323   —  13,323   12,541   (13)  12,528   795  6.3%
    Data processing 10,567   —  10,567   9,962   (18)  9,944   623  6.3%
    Professional fees 1,843   —  1,843   2,216   (149)  2,067   (224) (10.8)%
    Outside services and consultants 10,850   —  10,850   8,449   (750)  7,699   3,151  40.9%
    Loan expense 5,411   —  5,411   5,492   (83)  5,409   2  —%
    FDIC insurance expense 2,558   —  2,558   2,377   (6)  2,371   187  7.9%
    Other losses 1,046   —  1,046   2,283   (5)  2,278   (1,232) (54.1)%
    Other expense 17,320   —  17,320   16,023   (2,574)  13,449   3,871  28.8%
    Total non–interest expense$143,201  $— $143,201  $133,394  $(3,825) $129,569  $13,632  10.5%
    Annualized non–interest expense to average assets 1.90%    1.90%  2.05%    1.99%    


    Total adjusted non–interest expense was $13.6 million higher for the year ended December 31, 2022 when compared to the same prior year period. The year–over–increase was due to increases in salaries and employee benefits, outside services and consultants, other expense, net occupancy expenses and data processing, offset by a decrease in other losses.

    Annualized non–interest expense as a percent of average assets was 1.84%, 1.91% and 2.01% for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively. Annualized non–interest expense, excluding acquisition expenses and non–recurring ESOP settlement expenses, as a percent of average assets was 1.84%, 1.91% and 1.87% for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively.

    Annualized non–interest expense as a percent of average assets was 1.90% and 2.05% for the year ended December 31, 2022 and 2021, respectively. Annualized non–interest expense, excluding acquisition expenses and non–recurring ESOP settlement expenses, as a percentage of average assets was 1.90% and 1.99% for the year ended December 31, 2022 and 2021, respectively.

    Income tax expense totaled $2.6 million for the fourth quarter of 2022, $2.0 million for the third quarters of 2022 and $4.1 million for the fourth quarter of 2021.

    Income tax expense totaled $12.2 million for the year ended December 31, 2022, a decrease of $3.2 million when compared to the year ended December 31, 2021. The decrease in income tax expense was primarily due to an increase income tax credits received during 2022.

    Capital

    The capital resources of the Company and the Bank exceeded regulatory capital ratios for “well capitalized” banks at December 31, 2022. Stockholders’ equity totaled $677.4 million at December 31, 2022 and the ratio of average stockholders’ equity to average assets was 9.07% for the twelve months ended December 31, 2022.

    The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of December 31, 2022.

     Actual Required for Capital
    Adequacy Purposes    		 Required for Capital
    Adequacy Purposes
    with Capital Buffer    		 Well Capitalized
    Under Prompt
    Corrective Action
    Provisions
     Amount Ratio Amount Ratio Amount Ratio Amount Ratio
    Total capital (to risk–weighted assets)               
    Consolidated$782,705 14.48% $432,525 8.00% $567,688 10.50%  N/A N/A 
    Bank 734,578 13.59%  432,413 8.00%  567,542 10.50% $540,516 10.00%
    Tier 1 capital (to risk–weighted assets)                
    Consolidated 736,150 13.62%  324,393 6.00%  459,557 8.50%  N/A N/A 
    Bank 686,069 12.69%  324,310 6.00%  459,439 8.50%  432,413 8.00%
    Common equity tier 1 capital (to risk–weighted assets)                
    Consolidated 616,231 11.40%  243,295 4.50%  378,459 7.00%  N/A N/A 
    Bank 686,069 12.69%  243,232 4.50%  378,361 7.00%  351,336 6.50%
    Tier 1 capital (to average assets)                
    Consolidated 736,150 10.23%  287,867 4.00%  287,867 4.00%  N/A N/A 
    Bank 686,069 9.55%  287,262 4.00%  287,262 4.00%  359,077 5.00%

    Tangible book value per common share (“TBVPS”) declined $0.99 during the twelve months ended December 31, 2022 to $11.59, as unrealized net losses on securities available for sale (“AFS”) of $2.71 per common share, reduced accumulated other comprehensive income (“AOCI”) by $118.0 million during the twelve months ended December 31, 2022.

    Liquidity

    The Bank maintains a stable base of core deposits provided by long–standing relationships with individuals and local businesses. These deposits are the principal source of liquidity, while other sources of liquidity for Horizon include earnings, loan repayments, investment security sales and maturities, proceeds from the sale of residential mortgage loans, unpledged investment securities and borrowing relationships with correspondent banks, including the Federal Home Loan Bank of Indianapolis (the “FHLB”). At December 31, 2022, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $438.0 million in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Discount Window. The Bank also had approximately $2.1 billion of unpledged investment securities at December 31, 2022. Total available liquidity was $2.7 billion at December 31, 2022.

    Forward Looking Statements

    This press release may contain forward–looking statements regarding the financial performance, business prospects, growth and operating strategies of Horizon Bancorp, Inc. and its affiliates (collectively, “Horizon”). For these statements, Horizon claims the protection of the safe harbor for forward–looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Horizon, including the information in the filings we make with the Securities and Exchange Commission (the “SEC”). Forward–looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward–looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance.

    Although management believes that the expectations reflected in such forward–looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include: changes in the level and volatility of interest rates, changes in spreads on earning assets and changes in interest bearing liabilities; increased interest rate sensitivity; continuing increases in inflation; loss of key Horizon personnel; increases in disintermediation; potential loss of fee income, including interchange fees, as new and emerging alternative payment platforms take a greater market share of the payment systems; estimates of fair value of certain of Horizon’s assets and liabilities; changes in prepayment speeds, loan originations, credit losses, market values, collateral securing loans and other assets; changes in sources of liquidity; continuing risks and uncertainties relating to the COVID–19 pandemic and government responses thereto; legislative and regulatory actions and reforms; changes in accounting policies or procedures as may be adopted and required by regulatory agencies; litigation, regulatory enforcement, and legal compliance risk and costs; rapid technological developments and changes; cyber terrorism and data security breaches; the rising costs of cybersecurity; the ability of the U.S. federal government to manage federal debt limits; climate change and social justice initiatives; material changes outside the U.S. or in overseas relations, including changes in U.S. trade relations related to imposition of tariffs, Brexit, and the phase out of the London Interbank Offered Rate (“LIBOR”); the inability to realize cost savings or revenues or to effectively implement integration plans and other consequences associated with mergers, acquisitions, and divestitures; acts of terrorism, war and global conflicts, such as the Russia and Ukraine conflict; and supply chain disruptions and delays. These and additional factors that could cause actual results to differ materially from those expressed in the forward–looking statements are discussed in Horizon’s reports (such as the Annual Report on Form 10–K, Quarterly Reports on Form 10–Q, and Current Reports on Form 8–K) filed with the SEC and available at the SEC’s Internet website (www.sec.gov).risk factors relating to the banking industry and the other factors detailed from time to time in Horizon’s reports filed with the Securities and Exchange Commission, including those described in Horizon’s Annual Report on Form 10–K and its quarterly reports on Form 10–Q. Further, statements about the effects of the COVID–19 pandemic on our business, operations, financial performance, and prospects may constitute forward–looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward–looking statements due to factors and future developments that are uncertain, unpredictable, and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties, and us. Undue reliance should not be placed on the forward–looking statements, which speak only as of the date hereof. Horizon does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to update any forward–looking statement to reflect the events or circumstances after the date on which the forward–looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

    Financial Highlights
    (Dollars in Thousands, Unaudited)
      
     December 31, September 30, June 30, March 31, December 31,
      2022  2022  2022  2022  2021
    Balance sheet:         
    Total assets$7,872,518 $7,718,695 $7,640,936 $7,420,328 $7,374,903
    Interest earning deposits & federal funds sold 12,233  7,302  5,646  20,827  502,364
    Interest earning time deposits 2,812  2,814  3,799  4,046  4,782
    Investment securities 3,020,306  3,017,191  3,093,792  3,118,641  2,713,255
    Commercial loans 2,467,422  2,403,743  2,363,991  2,259,327  2,213,945
    Mortgage warehouse loans 69,529  73,690  116,488  105,118  109,031
    Residential mortgage loans 653,292  634,901  608,582  593,372  594,382
    Consumer loans 967,755  919,198  866,819  768,854  741,176
    Total loans 4,157,998  4,031,532  3,955,880  3,726,671  3,658,534
    Earning assets 7,225,833  7,087,368  7,088,737  6,898,208  6,878,968
    Non–interest bearing deposit accounts 1,277,768  1,315,155  1,328,213  1,325,570  1,360,338
    Interest bearing transaction accounts 3,582,891  3,736,798  3,760,890  3,782,644  3,711,767
    Time deposits 997,115  778,885  756,482  743,283  730,886
    Total deposits 5,857,774  5,830,838  5,845,585  5,851,497  5,802,991
    Borrowings 1,142,949  1,048,091  959,222  728,664  712,739
    Subordinated notes 58,896  58,860  58,823  58,786  58,750
    Junior subordinated debentures issued to capital trusts 57,027  56,966  56,907  56,850  56,785
    Total stockholders’ equity 677,375  644,993  657,865  677,450  723,209


    Financial Highlights
    (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
     Three Months Ended
     December 31, September 30, June 30, March 31, December 31,
      2022   2022   2022   2022   2021 
    Income statement:         
    Net interest income$48,782  $51,861  $52,044  $46,831  $48,477 
    Credit loss expense (recovery) (69)  (601)  240   (1,386)  (2,071)
    Non–interest income 10,674   10,188   12,434   14,155   12,828 
    Non–interest expense 35,711   36,816   35,404   35,270   37,871 
    Income tax expense 2,649   2,013   3,975   3,539   4,080 
    Net income$21,165  $23,821  $24,859  $23,563  $21,425 
              
    Per share data:         
    Basic earnings per share$0.49  $0.55  $0.57  $0.54  $0.49 
    Diluted earnings per share 0.48   0.55   0.57   0.54   0.49 
    Cash dividends declared per common share 0.16   0.16   0.16   0.15   0.15 
    Book value per common share 15.55   14.80   15.10   15.55   16.61 
    Tangible book value per common share 11.59   10.82   11.11   11.54   12.58 
    Market value – high 20.00   20.59   19.21   23.45   21.14 
    Market value – low$14.51  $16.74  $16.72  $18.67  $18.01 
    Weighted average shares outstanding – Basis 43,574,151   43,573,370   43,572,796   43,554,713   43,534,298 
    Weighted average shares outstanding – Diluted 43,667,954   43,703,793   43,684,691   43,734,556   43,733,416 
              
    Key ratios:         
    Return on average assets 1.09%  1.24%  1.33%  1.31%  1.14%
    Return on average common stockholders’ equity 12.72   13.89   14.72   13.34   11.81 
    Net interest margin 2.85   3.04   3.13   2.90   2.87 
    Allowance for credit losses to total loans 1.21   1.27   1.32   1.41   1.48 
    Average equity to average assets 8.55   8.91   9.06   9.79   9.64 
    Efficiency ratio 60.06   59.33   54.91   57.83   61.77 
    Annualized non–interest expense to average assets 1.84   1.91   1.90   1.95   2.01 
    Bank only capital ratios:         
    Tier 1 capital to average assets 9.55   8.84   8.85   8.83   8.50 
    Tier 1 capital to risk weighted assets 12.69   12.74   12.87   13.23   13.69 
    Total capital to risk weighted assets 13.59   13.65   13.83   14.25   14.72 


    Financial Highlights
    (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
     Twelve Months Ended
     December 31, December 31,
      2022   2021 
    Income statement:   
    Net interest income$199,518  $175,805 
    Credit loss expense (recovery) (1,816)  (2,084)
    Non–interest income 47,451   57,952 
    Non–interest expense 143,201   133,394 
    Income tax expense 12,176   15,356 
    Net income$93,408  $87,091 
        
    Per share data:   
    Basic earnings per share$2.14  $1.99 
    Diluted earnings per share 2.14   1.98 
    Cash dividends declared per common share 0.63   0.56 
    Book value per common share 15.55   16.61 
    Tangible book value per common share 11.59   12.58 
    Market value – high 23.45   21.14 
    Market value – low$14.51  $15.43 
    Weighted average shares outstanding – Basis 43,568,823   43,802,733 
    Weighted average shares outstanding – Diluted 43,699,734   43,955,280 
        
    Key ratios:   
    Return on average assets 1.24%  1.34%
    Return on average common stockholders’ equity 13.66   12.23 
    Net interest margin 2.98   3.03 
    Allowance for credit losses to total loans 1.21   1.48 
    Average equity to average assets 9.07   10.93 
    Efficiency ratio 57.98   57.07 
    Annualized non–interest expense to average assets 1.90   2.05 
    Bank only capital ratios:   
    Tier 1 capital to average assets 9.55   8.50 
    Tier 1 capital to risk weighted assets 12.69   13.69 
    Total capital to risk weighted assets 13.59   14.72 


    Financial Highlights
    (Dollars in Thousands Except Ratios, Unaudited)
      
     December 31, September 30, June 30, March 31, December 31,
      2022   2022   2022   2022   2021 
    Loan data:         
    Substandard loans$56,194  $57,932  $59,377  $57,928  $56,968 
    30 to 89 days delinquent 10,709   6,970   6,739   6,358   8,536 
              
    Non–performing loans:         
    90 days and greater delinquent – accruing interest 92   193   210   107   145 
    Trouble debt restructures – accruing interest 2,570   2,529   2,535   2,372   2,391 
    Trouble debt restructures – non–accrual 1,548   1,665   1,345   1,501   1,521 
    Non–accrual loans 17,630   14,771   16,116   16,133   14,962 
    Total non–performing loans$21,840  $19,158  $20,206  $20,113  $19,019 
    Non–performing loans to total loans 0.52%  0.47%  0.51%  0.54%  0.52%


    Allocation of the Allowance for Credit Losses
    (Dollars in Thousands, Unaudited)
      
     December 31, September 30, June 30, March 31, December 31,
     2022 2022 2022 2022 2021
    Commercial$32,445 $33,806 $34,802 $37,789 $40,775
    Residential mortgage 5,577  5,137  4,422  4,351  3,856
    Mortgage warehouse 1,020  1,024  1,067  1,055  1,059
    Consumer 11,422  11,402  12,059  9,313  8,596
    Total$50,464 $51,369 $52,350 $52,508 $54,286


    Net Charge–offs (Recoveries)
    (Dollars in Thousands Except Ratios, Unaudited)
      
     December 31, September 30, June 30, March 31, December 31,
      2022   2022   2022   2022   2021 
    Commercial$(94) $51  $(75) $38  $926 
    Residential mortgage (8)  (75)  40   (10)  126 
    Mortgage warehouse —   —   —   —   — 
    Consumer 387   162   319   108   360 
    Total$285  $138  $284  $136  $1,412 
    Percent of net charge–offs (recoveries) to average loans outstanding for the period 0.01%  0.00%  0.01%  0.00%  0.04%


    Total Non–performing Loans
    (Dollars in Thousands Except Ratios, Unaudited)
      
     December 31, September 30, June 30, March 31, December 31,
      2022   2022   2022   2022   2021 
    Commercial$9,330  $7,199  $8,008  $7,844  $7,509 
    Residential mortgage 8,123   8,047   8,469   8,584   8,005 
    Mortgage warehouse —   —   —   —   — 
    Consumer 4,387   3,912   3,729   3,685   3,505 
    Total$21,840  $19,158  $20,206  $20,113  $19,019 
    Non–performing loans to total loans 0.52%  0.47%  0.51%  0.54%  0.52%


    Other Real Estate Owned and Repossessed Assets
    (Dollars in Thousands, Unaudited)
      
     December 31, September 30, June 30, March 31, December 31,
     2022 2022 2022 2022 2021
    Commercial$1,881 $3,206 $1,414 $2,245 $2,861
    Residential mortgage 107  22  —  170  695
    Mortgage warehouse —  —  —  —  —
    Consumer 152  14  58  5  5
    Total$2,140 $3,242 $1,472 $2,420 $3,561


    Average Balance Sheets
    (Dollars in Thousands, Unaudited)
     Three Months Ended Three Months Ended
     December 31, 2022 December 31, 2021
     Average
    Balance    		 Interest Average
    Rate    		 Average
    Balance    		 Interest Average
    Rate
    Assets           
    Interest earning assets           
    Federal funds sold$4,023  $34 3.35% $654,225  $251 0.15%
    Interest earning deposits 8,233   48 2.31%  22,537   32 0.56%
    Investment securities – taxable 1,655,728   8,703 2.09%  1,405,689   6,208 1.75%
    Investment securities – non–taxable (1) 1,385,340   7,543 2.73%  1,224,911   6,456 2.65%
    Loans receivable (2) (3) 4,038,656   50,859 5.02%  3,644,688   39,672 4.34%
    Total interest earning assets 7,091,980   67,187 3.88%  6,952,050   52,619 3.11%
    Non–interest earning assets           
    Cash and due from banks 96,835       102,273     
    Allowance for credit losses (51,323)      (56,540)    
    Other assets 580,874       463,560     
    Total average assets$7,718,366      $7,461,343     
                
    Liabilities and Stockholders’ Equity           
    Interest bearing liabilities           
    Interest bearing deposits$4,555,887  $10,520 0.92% $4,543,989  $1,663 0.15%
    Borrowings 850,236   5,729 2.67%  525,638   1,025 0.77%
    Repurchase agreements 141,676   311 0.87%  137,868   36 0.10%
    Subordinated notes 58,874   881 5.94%  58,728   881 5.95%
    Junior subordinated debentures issued to capital trusts 56,988   964 6.71%  56,745   537 3.75%
    Total interest bearing liabilities 5,663,661   18,405 1.29%  5,322,968   4,142 0.31%
    Non–interest bearing liabilities           
    Demand deposits 1,321,139       1,366,621     
    Accrued interest payable and other liabilities 73,378       52,111     
    Stockholders’ equity 660,188       719,643     
    Total average liabilities and stockholders’ equity$7,718,366      $7,461,343     
                
    Net interest income / spread  $48,782 2.59%   $48,477 2.80%
    Net interest income as a percent of average interest earning assets (1)    2.85%     2.87%
                
    (1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
    (2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
    (3) Non–accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis.


    Average Balance Sheets
    (Dollars in Thousands, Unaudited)
     Twelve Months Ended Twelve Months Ended
     December 31, 2022 December 31, 2021
     Average
    Balance    		 Interest Average
    Rate    		 Average
    Balance    		 Interest Average
    Rate
    Assets           
    Interest earning assets           
    Federal funds sold$62,211  $165 0.27% $398,528  $535 0.13%
    Interest earning deposits 13,596   141 1.04%  25,993   160 0.62%
    Investment securities – taxable 1,700,418   33,202 1.95%  884,244   14,437 1.63%
    Investment securities – non–taxable (1) 1,356,045   29,025 2.71%  1,086,942   23,246 2.71%
    Loans receivable (2) (3) 3,845,137   173,500 4.53%  3,639,454   155,732 4.30%
    Total interest earning assets 6,977,407   236,033 3.50%  6,035,161   194,110 3.33%
    Non–interest earning assets           
    Cash and due from banks 99,885       89,993     
    Allowance for credit losses (52,606)      (56,798)    
    Other assets 509,229       445,895     
    Total average assets$7,533,915      $6,514,251     
                
    Liabilities and Stockholders’ Equity           
    Interest bearing liabilities           
    Interest bearing deposits$4,513,668  $17,809 0.39% $3,897,750  $7,867 0.20%
    Borrowings 696,584   11,938 1.71%  425,214   4,546 1.07%
    Repurchase agreements 141,048   527 0.37%  123,675   155 0.13%
    Subordinated notes 58,819   3,522 5.99%  58,672   3,522 6.00%
    Junior subordinated debentures issued to capital trusts 56,899   2,719 4.78%  56,657   2,215 3.91%
    Total interest bearing liabilities 5,467,018   36,515 0.67%  4,561,968   18,305 0.40%
    Non–interest bearing liabilities           
    Demand deposits 1,332,937       1,188,275     
    Accrued interest payable and other liabilities 50,330       51,886     
    Stockholders’ equity 683,630       712,122     
    Total average liabilities and stockholders’ equity$7,533,915      $6,514,251     
                
    Net interest income / spread  $199,518 2.83%   $175,805 2.93%
    Net interest income as a percent of average interest earning assets (1)    2.98%     3.03%
                
    (1) Securities balances represent daily average balances for the fair value of securities. The average rate is calculated based on the daily average balance for the amortized cost of securities. The average rate is presented on a tax equivalent basis.
    (2) Includes fees on loans. The inclusion of loan fees does not have a material effect on the average interest rate.
    (3) Non–accruing loans for the purpose of the computation above are included in the daily average loan amounts outstanding. Loan totals are shown net of unearned income and deferred loan fees. The average rate is presented on a tax equivalent basis.


    Condensed Consolidated Balance Sheets
    (Dollars in Thousands)
        
     December 31,
    2022    		 December 31,
    2021
     (Unaudited)  
    Assets   
    Cash and due from banks$123,505  $593,508
    Interest earning time deposits 2,812   4,782
    Investment securities, available for sale 997,558   1,160,812
    Investment securities, held to maturity (fair value $1,681,309 and $1,559,991) 2,022,748   1,552,443
    Loans held for sale 5,807   12,579
    Loans, net of allowance for credit losses of $50,464 and $54,286 4,107,534   3,604,248
    Premises and equipment, net 92,677   93,441
    Federal Home Loan Bank stock 26,677   24,440
    Goodwill 155,211   154,572
    Other intangible assets 17,239   20,941
    Interest receivable 35,294   26,137
    Cash value of life insurance 146,175   97,150
    Other assets 139,281   66,836
    Total assets$7,872,518  $7,411,889
        
    Liabilities   
    Deposits   
    Non–interest bearing$1,277,768  $1,360,338
    Interest bearing 4,580,006   4,442,653
    Total deposits 5,857,774   5,802,991
    Borrowings 1,142,949   712,739
    Subordinated notes 58,896   58,750
    Junior subordinated debentures issued to capital trusts 57,027   56,785
    Interest payable 5,380   2,235
    Other liabilities 73,117   55,180
    Total liabilities 7,195,143   6,688,680
    Commitments and contingent liabilities   
    Stockholders’ equity   
    Preferred stock, Authorized, 1,000,000 shares, Issued 0 shares —   —
    Common stock, no par value, Authorized 99,000,000 shares
    Issued and Outstanding 43,937,889 and 43,811,421 shares    		 —   —
    Additional paid–in capital 354,188   352,122
    Retained earnings 429,385   363,742
    Accumulated other comprehensive income (106,198)  7,345
    Total stockholders’ equity 677,375   723,209
    Total liabilities and stockholders’ equity$7,872,518  $7,411,889


    Condensed Consolidated Statements of Income
    (Dollars in Thousands Except Per Share Data, Unaudited)
     Three Months Ended
     December 31, September 30, June 30, March 31, December 31,
      2022   2022  2022  2022   2021 
    Interest income         
    Loans receivable$50,859  $45,517  $40,585 $36,539  $39,672 
    Investment securities – taxable 8,785   8,501   8,716  7,506   6,491 
    Investment securities – non–taxable 7,543   7,478   7,307  6,697   6,456 
    Total interest income 67,187   61,496   56,608  50,742   52,619 
    Interest expense         
    Deposits 10,520   4,116   1,677  1,496   1,663 
    Borrowed funds 6,040   3,895   1,450  1,080   1,061 
    Subordinated notes 881   880   881  880   881 
    Junior subordinated debentures issued to capital trusts 964   744   556  455   537 
    Total interest expense 18,405   9,635   4,564  3,911   4,142 
    Net interest income 48,782   51,861   52,044  46,831   48,477 
    Credit loss expense (recovery) (69)  (601)  240  (1,386)  (2,071)
    Net interest income after credit loss expense (recovery) 48,851   52,462   51,804  48,217   50,548 
    Non–interest Income         
    Service charges on deposit accounts 2,947   3,023   2,833  2,795   2,510 
    Wire transfer fees 118   148   170  159   205 
    Interchange fees 2,951   3,089   3,582  2,780   3,082 
    Fiduciary activities 1,270   1,203   1,405  1,503   1,591 
    Gain on sale of mortgage loans 1,196   1,441   2,501  2,027   4,167 
    Mortgage servicing income net of impairment 637   355   319  3,489   300 
    Increase in cash value of bank owned life insurance 751   814   519  510   547 
    Death benefit on bank owned life insurance —   —   644  —   — 
    Other income 804   115   461  892   426 
    Total non–interest income 10,674   10,188   12,434  14,155   12,828 
    Non–interest expense         
    Salaries and employee benefits 19,978   20,613   19,957  19,735   20,549 
    Net occupancy expenses 3,279   3,293   3,190  3,561   3,204 
    Data processing 2,884   2,539   2,607  2,537   2,672 
    Professional fees 694   552   283  314   562 
    Outside services and consultants 2,985   2,855   2,485  2,525   2,197 
    Loan expense 1,281   1,392   1,533  1,205   1,304 
    FDIC insurance expense 388   670   775  725   798 
    Other losses 118   398   362  168   1,925 
    Other expenses 4,104   4,504   4,212  4,500   4,660 
    Total non–interest expense 35,711   36,816   35,404  35,270   37,871 
    Income before income taxes 23,814   25,834   28,834  27,102   25,505 
    Income tax expense 2,649   2,013   3,975  3,539   4,080 
    Net income$21,165  $23,821  $24,859 $23,563  $21,425 
    Basic earnings per share$0.49  $0.55  $0.57 $0.54  $0.49 
    Diluted earnings per share 0.48   0.55   0.57  0.54   0.49 


    Condensed Consolidated Statements of Income
    (Dollars in Thousands Except Per Share Data, Unaudited)
     Twelve Months Ended
     December 31, December 31,
      2022   2021 
    Interest income   
    Loans receivable$173,500  $155,732 
    Investment securities – taxable 33,508   15,132 
    Investment securities – non–taxable 29,025   23,246 
    Total interest income 236,033   194,110 
    Interest expense   
    Deposits 17,809   7,867 
    Borrowed funds 12,465   4,701 
    Subordinated notes 3,522   3,522 
    Junior subordinated debentures issued to capital trusts 2,719   2,215 
    Total interest expense 36,515   18,305 
    Net interest income 199,518   175,805 
    Credit loss expense (recovery) (1,816)  (2,084)
    Net interest income after credit loss expense (recovery) 201,334   177,889 
    Non–interest Income   
    Service charges on deposit accounts 11,598   9,192 
    Wire transfer fees 595   892 
    Interchange fees 12,402   10,901 
    Fiduciary activities 5,381   7,419 
    Gains / (losses) on sale of investment securities —   914 
    Gain on sale of mortgage loans 7,165   19,163 
    Mortgage servicing income net of impairment 4,800   2,352 
    Increase in cash value of bank owned life insurance 2,594   2,094 
    Death benefit on bank owned life insurance 644   783 
    Other income 2,272   4,242 
    Total non–interest income 47,451   57,952 
    Non–interest expense   
    Salaries and employee benefits 80,283   74,051 
    Net occupancy expenses 13,323   12,541 
    Data processing 10,567   9,962 
    Professional fees 1,843   2,216 
    Outside services and consultants 10,850   8,449 
    Loan expense 5,411   5,492 
    FDIC insurance expense 2,558   2,377 
    Other losses 1,046   2,283 
    Other expenses 17,320   16,023 
    Total non–interest expense 143,201   133,394 
    Income before income taxes 105,584   102,447 
    Income tax expense 12,176   15,356 
    Net income$93,408  $87,091 
    Basic earnings per share$2.14  $1.99 
    Diluted earnings per share 2.14   1.98 

    Use of Non–GAAP Financial Measures

    Certain information set forth in this press release refers to financial measures determined by methods other than in accordance with GAAP. Specifically, we have included non–GAAP financial measures relating to net income, diluted earnings per share, pre–tax, pre–provision income, net interest margin, tangible stockholders’ equity, tangible book value per share, efficiency ratio, the return on average assets, the return on average common equity and the return on average tangible equity. In each case, we have identified special circumstances that we consider to be non–recurring and have excluded them. We believe that this shows the impact of such events as acquisition–related purchase accounting adjustments, among others we have identified in our reconciliations. Horizon believes these non–GAAP financial measures are helpful to investors and provide a greater understanding of our business and financial results without giving effect to the purchase accounting impacts and one–time costs of acquisitions and non–recurring items. These measures are not necessarily comparable to similar measures that may be presented by other companies and should not be considered in isolation or as a substitute for the related GAAP measure. See the tables and other information below and contained elsewhere in this press release for reconciliations of the non–GAAP information identified herein and its most comparable GAAP measures.

    Non–GAAP Reconciliation of Net Income
    (Dollars in Thousands, Unaudited)
     Three Months Ended Twelve Months Ended
     December 31, September 30, June 30, March 31, December 31, December 31, December 31,
      2022  2022  2022   2022  2021   2022   2021 
    Net income as reported$21,165 $23,821 $24,859  $23,563 $21,425  $93,408  $87,091 
    Acquisition expenses —  —  —   —  884   —   1,925 
    Tax effect —  —  —   —  (184)  —   (401)
    Net income excluding acquisition expenses 21,165  23,821  24,859   23,563  22,125   93,408   88,615 
    Credit loss expense acquired loans —  —  —   —  —   —   2,034 
    Tax effect —  —  —   —  —   —   (427)
    Net income excluding credit loss expense acquired loans 21,165  23,821  24,859   23,563  22,125   93,408   90,222 
    Gain on sale of ESOP trustee accounts —  —  —   —  —   —   (2,329)
    Tax effect —  —  —   —  —   —   489 
    Net income excluding gain on sale of ESOP trustee accounts 21,165  23,821  24,859   23,563  22,125   93,408   88,382 
    ESOP settlement expenses —  —  —   —  1,900   —   1,900 
    Tax effect —  —  —   —  (315)  —   (315)
    Net income excluding ESOP settlement expenses 21,165  23,821  24,859   23,563  23,710   93,408   89,967 
    (Gain) / loss on sale of investment securities —  —  —   —  —   —   (914)
    Tax effect —  —  —   —  —   —   192 
    Net income excluding (gain) / loss on sale of investment securities 21,165  23,821  24,859   23,563  23,710   93,408   89,245 
    Death benefit on bank owned life insurance (“BOLI”) —  —  (644)  —  —   (644)  (783)
    Net income excluding death benefit on BOLI 21,165  23,821  24,215   23,563  23,710   92,764   88,462 
    Prepayment penalties on borrowings —  —  —   —  —   —   125 
    Tax effect —  —  —   —  —   —   (26)
    Net income excluding prepayment penalties on borrowings 21,165  23,821  24,215   23,563  23,710   92,764   88,561 
    Adjusted net income$21,165 $23,821 $24,215  $23,563 $23,710  $92,764  $88,561 


    Non–GAAP Reconciliation of Diluted Earnings per Share
    (Dollars in Thousands, Unaudited)
     Three Months Ended Twelve Months Ended
     December 31, September 30, June 30, March 31, December 31, December 31, December 31,
      2022  2022  2022   2022  2021   2022   2021 
    Diluted earnings per share (“EPS”) as reported$0.48 $0.55 $0.57  $0.54 $0.49  $2.14  $1.98 
    Acquisition expenses —  —  —   —  0.02   —   0.04 
    Tax effect —  —  —   —  —   —   — 
    Diluted EPS excluding acquisition expenses 0.48  0.55  0.57   0.54  0.51   2.14   2.02 
    Credit loss expense acquired loans —  —  —   —  —   —   0.05 
    Tax effect —  —  —   —  —   —   (0.01)
    Diluted EPS excluding credit loss expense acquired loans 0.48  0.55  0.57   0.54  0.51   2.14   2.06 
    Gain on sale of ESOP trustee accounts —  —  —   —  —   —   (0.05)
    Tax effect —  —  —   —  —   —   0.01 
    Diluted EPS excluding gain on sale of ESOP trustee accounts 0.48  0.55  0.57   0.54  0.51   2.14   2.02 
    ESOP settlement expenses —  —  —   —  0.04   —   0.04 
    Tax effect —  —  —   —  (0.01)  —   (0.01)
    Diluted EPS excluding ESOP settlement expenses 0.48  0.55  0.57   0.54  0.54   2.14   2.05 
    (Gain) / loss on sale of investment securities —  —  —   —  —   —   (0.02)
    Tax effect —  —  —   —  —   —   — 
    Diluted EPS excluding (gain) / loss on sale of investment securities 0.48  0.55  0.57   0.54  0.54   2.14   2.03 
    Death benefit on bank owned life insurance (“BOLI”) —  —  (0.01)  —  —   (0.01)  (0.03)
    Diluted EPS excluding death benefit on BOLI 0.48  0.55  0.56   0.54  0.54   2.13   2.00 
    Prepayment penalties on borrowings —  —  —   —  —   —   — 
    Tax effect —  —  —   —  —   —   — 
    Diluted EPS excluding prepayment penalties on borrowings 0.48  0.55  0.56   0.54  0.54   2.13   2.00 
    Adjusted diluted EPS$0.48 $0.55 $0.56  $0.54 $0.54  $2.13  $2.00 


    Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Income
    (Dollars in Thousands, Unaudited)
     Three Months Ended Twelve Months Ended
     December 31, September 30, June 30, March 31, December 31, December 31, December 31,
      2022   2022   2022   2022   2021   2022   2021 
    Pre–tax income$23,814  $25,834  $28,834  $27,102  $25,505  $105,584  $102,447 
    Credit loss expense (69)  (601)  240   (1,386)  (2,071)  (1,816)  (2,084)
    Pre–tax, pre–provision income$23,745  $25,233  $29,074  $25,716  $23,434  $103,768  $100,363 
                  
    Pre–tax, pre–provision income$23,745  $25,233  $29,074  $25,716  $23,434  $103,768  $100,363 
    Acquisition expenses —   —   —   —   884   —   1,925 
    Gain on sale of ESOP trustee accounts —   —   —   —   —   —   (2,329)
    ESOP settlement expenses —   —   —   —   1,900   —   1,900 
    (Gain) / loss on sale of investment securities —   —   —   —   —   —   (914)
    Death benefit on BOLI —   —   (644)  —   —   (644)  (783)
    Prepayment penalties on borrowings —   —   —   —   —   —   125 
    Adjusted pre–tax, pre–provision income$23,745  $25,233  $28,430  $25,716  $26,218  $103,124  $100,162 


    Non–GAAP Reconciliation of Net Interest Margin
    (Dollars in Thousands, Unaudited)
     Three Months Ended Twelve Months Ended
     December 31, September 30, June 30, March 31, December 31, December 31, December 31,
      2022   2022   2022   2022   2021   2022   2021 
    Net interest income as reported$48,782  $51,861  $52,044  $46,831  $48,477  $199,518  $175,805 
    Average interest earning assets 7,091,980   7,056,208   6,943,633   6,814,756   6,952,050   6,977,407   6,035,161 
    Net interest income as a percentage of average interest earning assets (“Net Interest Margin”) 2.85%  3.04%  3.13%  2.90%  2.87%  2.98%  3.03%
                  
    Net interest income as reported$48,782  $51,861  $52,044  $46,831  $48,477  $199,518  $175,805 
    Acquisition–related purchase accounting adjustments (“PAUs”) (431)  (906)  (1,223)  (916)  (1,819)  (3,476)  (4,503)
    Prepayment penalties on borrowings —   —   —   —   —   —   125 
    Adjusted net interest income$48,351  $50,955  $50,821  $45,915  $46,658  $196,042  $171,302 
    Adjusted net interest margin 2.83%  2.99%  3.06%  2.85%  2.77%  2.93%  2.96%


    Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share
    (Dollars in Thousands, Unaudited)
      
     December 31, September 30, June 30, March 31, December 31,
      2022  2022  2022  2022  2021
    Total stockholders’ equity$677,375 $644,993 $657,865 $677,450 $723,209
    Less: Intangible assets 172,450  173,375  173,662  174,588  175,513
    Total tangible stockholders’ equity$504,925 $471,618 $484,203 $502,862 $547,696
    Common shares outstanding 43,574,151  43,574,151  43,572,796  43,572,796  43,547,942
    Book value per common share$15.55 $14.80 $15.10 $15.55 $16.61
    Tangible book value per common share$11.59 $10.82 $11.11 $11.54 $12.58


    Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
    (Dollars in Thousands, Unaudited)
     Three Months Ended Twelve Months Ended
     December 31, September 30, June 30, March 31, December 31, December 31, December 31,
      2022   2022   2022   2022   2021   2022   2021 
    Non–interest expense as reported$35,711  $36,816  $35,404  $35,270  $37,871  $143,201  $133,394 
    Net interest income as reported 48,782   51,861   52,044   46,831   48,477   199,518   175,805 
    Non–interest income as reported$10,674  $10,188  $12,434  $14,155  $12,828  $47,451  $57,952 
    Non–interest expense / (Net interest income + Non–interest income) (“Efficiency Ratio”) 60.06%  59.33%  54.91%  57.83%  61.77%  57.98%  57.07%
                  
    Non–interest expense as reported$35,711  $36,816  $35,404  $35,270  $37,871  $143,201  $133,394 
    Acquisition expenses —   —   —   —   (884)  —   (1,925)
    ESOP settlement expenses —   —   —   —   (1,900)  —   (1,900)
    Non–interest expense excluding acquisition expenses and ESOP settlement expenses 35,711   36,816   35,404   35,270   35,087   143,201   129,569 
    Net interest income as reported 48,782   51,861   52,044   46,831   48,477   199,518   175,805 
    Prepayment penalties on borrowings —   —   —   —   —   —   125 
    Net interest income excluding prepayment penalties on borrowings 48,782   51,861   52,044   46,831   48,477   199,518   175,930 
    Non–interest income as reported 10,674   10,188   12,434   14,155   12,828   47,451   57,952 
    Gain on sale of ESOP trustee accounts —   —   —   —   —   —   (2,329)
    (Gain) / loss on sale of investment securities —   —   —   —   —   —   (914)
    Death benefit on BOLI —   —   (644)  —   —   (644)  (783)
    Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI$10,674  $10,188  $11,790  $14,155  $12,828  $46,807  $53,926 
    Adjusted efficiency ratio 60.06%  59.33%  55.46%  57.83%  57.23%  58.13%  56.37%


    Non–GAAP Reconciliation of Return on Average Assets
    (Dollars in Thousands, Unaudited)
     Three Months Ended Twelve Months Ended
     December 31, September 30, June 30, March 31, December 31, December 31, December 31,
      2022   2022   2022   2022   2021   2022   2021 
    Average assets$7,718,366  $7,635,102  $7,476,238  $7,319,675  $7,461,343  $7,533,915  $6,514,251 
    Return on average assets (“ROAA”) as reported 1.09%  1.24%  1.33%  1.31%  1.14%  1.24%  1.34%
    Acquisition expenses —   —   —   —   0.05   —   0.03 
    Tax effect —   —   —   —   (0.01)  —   (0.01)
    ROAA excluding acquisition expenses 1.09   1.24   1.33   1.31   1.18   1.24   1.36 
    Credit loss expense acquired loans —   —   —   —   —   —   0.03 
    Tax effect —   —   —   —   —   —   (0.01)
    ROAA excluding credit loss expense on acquired loans 1.09   1.24   1.33   1.31   1.18   1.24   1.38 
    Gain on sale of ESOP trustee accounts —   —   —   —   —   —   (0.04)
    Tax effect —   —   —   —   —   —   0.01 
    ROAA excluding gain on sale of ESOP trustee accounts 1.09   1.24   1.33   1.31   1.18   1.24   1.35 
    ESOP settlement expenses —   —   —   —   0.10   —   0.03 
    Tax effect —   —   —   —   (0.02)  —   — 
    ROAA excluding ESOP settlement expenses 1.09   1.24   1.33   1.31   1.26   1.24   1.38 
    (Gain) / loss on sale of investment securities —   —   —   —   —   —   (0.01)
    Tax effect —   —   —   —   —   —   — 
    ROAA excluding (gain) / loss on sale of investment securities 1.09   1.24   1.33   1.31   1.26   1.24   1.37 
    Death benefit on BOLI —   —   (0.03)  —   —   (0.01)  (0.01)
    ROAA excluding death benefit on BOLI 1.09   1.24   1.30   1.31   1.26   1.23   1.36 
    Prepayment penalties on borrowings —   —   —   —   —   —   — 
    Tax effect —   —   —   —   —   —   — 
    ROAA excluding prepayment penalties on borrowings 1.09   1.24   1.30   1.31   1.26   1.23   1.36 
    Adjusted ROAA 1.09%  1.24%  1.30%  1.31%  1.26%  1.23%  1.36%


    Non–GAAP Reconciliation of Return on Average Common Equity
    (Dollars in Thousands, Unaudited)
     Three Months Ended Twelve Months Ended
     December 31, September 30, June 30, March 31, December 31, December 31, December 31,
      2022   2022   2022   2022   2021   2022   2021 
    Average common equity$660,188  $680,376  $677,299  $716,341  $719,643  $683,630  $712,122 
    Return on average common equity (“ROACE”) as reported 12.72%  13.89%  14.72%  13.34%  11.81%  13.66%  12.23%
    Acquisition expenses —   —   —   —   0.49   —   0.27 
    Tax effect —   —   —   —   (0.10)  —   (0.06)
    ROACE excluding acquisition expenses 12.72   13.89   14.72   13.34   12.20   13.66   12.44 
    Credit loss expense acquired loans —   —   —   —   —   —   0.29 
    Tax effect —   —   —   —   —   —   (0.06)
    ROACE excluding credit loss expense acquired loans 12.72   13.89   14.72   13.34   12.20   13.66   12.67 
    Gain on sale of ESOP trustee accounts —   —   —   —   —   —   (0.33)
    Tax effect —   —   —   —   —   —   0.07 
    ROACE excluding gain on sale of ESOP trustee accounts 12.72   13.89   14.72   13.34   12.20   13.66   12.41 
    ESOP settlement expenses —   —   —   —   1.05   —   0.27 
    Tax effect —   —   —   —   (0.17)  —   (0.04)
    ROACE excluding ESOP settlement expenses 12.72   13.89   14.72   13.34   13.08   13.66   12.64 
    (Gain) / loss on sale of investment securities —   —   —   —   —   —   (0.13)
    Tax effect —   —   —   —   —   —   0.03 
    ROACE excluding (gain) / loss on sale of investment securities 12.72   13.89   14.72   13.34   13.08   13.66   12.54 
    Death benefit on BOLI —   —   (0.38)  —   —   (0.09)  (0.11)
    ROACE excluding death benefit on BOLI 12.72   13.89   14.34   13.34   13.08   13.57   12.43 
    Prepayment penalties on borrowings —   —   —   —   —   —   0.02 
    Tax effect —   —   —   —   —   —   — 
    ROACE excluding prepayment penalties on borrowings 12.72%  13.89%  14.34%  13.34%  13.08%  13.57%  12.45%
    Adjusted ROACE 12.72%  13.89%  14.34%  13.34%  13.08%  13.57%  12.45%


    Non–GAAP Reconciliation of Return on Average Tangible Equity
    (Dollars in Thousands, Unaudited)
     Three Months Ended Twelve Months Ended
     December 31, September 30, June 30, March 31, December 31, December 31, December 31,
      2022   2022   2022   2022   2021   2022   2021 
    Average tangible equity$660,188  $680,376  $677,299  $716,341  $719,643  $683,630  $712,122 
    Less: Average intangible assets 173,050   173,546   175,321   176,356   179,594   174,003   175,811 
    Average tangible equity$487,138  $506,830  $501,978  $539,985  $540,049  $509,627  $536,311 
    Return on average tangible equity (“ROATE”) as reported 17.24%  18.65%  19.86%  17.70%  15.74%  18.33%  16.24%
    Acquisition expenses —   —   —   —   0.65   —   0.36 
    Tax effect —   —   —   —   (0.14)  —   (0.08)
    ROATE excluding acquisition expenses 17.24   18.65   19.86   17.70   16.25   18.33   16.52 
    Credit loss expense acquired loans —   —   —   —   —   —   0.38 
    Tax effect —   —   —   —   —   —   (0.08)
    ROATE excluding credit loss expense acquired loans 17.24   18.65   19.86   17.70   16.25   18.33   16.82 
    Gain on sale of ESOP trustee accounts —   —   —   —   —   —   (0.43)
    Tax effect —   —   —   —   —   —   0.10 
    ROATE excluding gain on sale of ESOP trustee accounts 17.24   18.65   19.86   17.70   16.25   18.33   16.49 
    ESOP settlement expenses —   —   —   —   1.40   —   0.35 
    Tax effect —   —   —   —   (0.23)  —   (0.06)
    ROATE excluding ESOP settlement expenses 17.24   18.65   19.86   17.70   17.42   18.33   16.78 
    (Gain) / loss on sale of investment securities —   —   —   —   —   —   (0.17)
    Tax effect —   —   —   —   —   —   0.04 
    ROATE excluding (gain) / loss on sale of investment securities 17.24   18.65   19.86   17.70   17.42   18.33   16.65 
    Death benefit on BOLI —   —   (0.51)  —   —   (0.13)  (0.15)
    ROATE excluding death benefit on BOLI 17.24   18.65   19.35   17.70   17.42   18.20   16.50 
    Prepayment penalties on borrowings —   —   —   —   —   —   0.02 
    Tax effect —   —   —   —   —   —   (0.01)
    ROATE excluding prepayment penalties on borrowings 17.24%  18.65%  19.35%  17.70%  17.42%  18.20%  16.51%
    Adjusted ROATE 17.24%  18.65%  19.35%  17.70%  17.42%  18.20%  16.51%


    Earnings Conference Call

    As previously announced, Horizon will host a conference call to review its fourth quarter and full year 2022 financial results and operating performance.

    Participants may access the live conference call on January 26, 2023 at 7:30 a.m. CT (8:30 a.m. ET) by dialing 833–974–2379 from the United States, 866–450–4696 from Canada or 1–412–317–5772 from international locations and requesting the “Horizon Bancorp Call.” Participants are asked to dial in approximately 10 minutes prior to the call.

    A telephone replay of the call will be available approximately one hour after the end of the conference through February 2, 2023. The replay may be accessed by dialing 877–344–7529 from the United States, 855–669–9658 from Canada or 1–412–317–0088 from other international locations, and entering the access code 9666758.

    About Horizon Bancorp, Inc.

    Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $7.9 billion–asset bank holding company for Horizon Bank, which serves customers across diverse and economically attractive Midwestern markets through convenient digital and virtual tools, as well as its Indiana and Michigan branches. Horizon's retail offerings include prime residential, indirect auto, and other secured consumer lending to in–market customers, as well as a range of personal banking and wealth management solutions. Horizon also provides a comprehensive array of in–market business banking and treasury management services, with commercial lending representing over half of total loans. More information on Horizon, headquartered in Northwest Indiana's Michigan City, is available at horizonbank.com and investor.horizonbank.com.

    Contact:Mark E. Secor
     Chief Financial Officer
    Phone:(219) 873-2611
    Fax:(219) 874-9280
    Date: January 25, 2023

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