• Horizon Bancorp, Inc. Reports First Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 26 Apr 2023 16:35:01   America/New_York

    MICHIGAN CITY, Ind., April 26, 2023 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) – Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three months ended March 31, 2023.

    “Horizon Bank is proud to announce reaching a significant new milestone of our 150th anniversary of continuous banking operations. We have planned celebrations to honor this occasion throughout the year and, as we like to say, we are 150 years strong!” Chairman and Chief Executive Officer Craig M. Dwight said.

    “Our enduring relationships with in–market clients and our advisors' focus on serving local businesses, consumers and communities are reflected in Horizon's stable deposits, growing loans and low credit costs in the first quarter,” Mr. Dwight continued. “Our organization's long–standing 150 year commitment to operational excellence and effective technology implementation was also evident in Horizon's first quarter results, including meaningful non–interest expense reductions and earnings per share of $0.42. Given our strong depositor relationships and lending opportunities in attractive Midwest markets, ample sources of liquidity, active balance sheet management, and talented advisors, we believe Horizon is very well positioned for continued success for 2023 and beyond."

    First Quarter 2023 Highlights

    • Deposits totaled $5.70 billion at period end, declining $155.8 million during the quarter, primarily due to a $122.2 million reduction in balances by municipal and other public depositors that have otherwise largely maintained their banking relationship with Horizon.

    • Consumer and commercial deposits totaled $4.28 billion at period end, declining just $33.6 million during the quarter.

    • 75% of total deposits at period end were FDIC insured, collateralized, or third–party insured, and the average tenure of all deposit accounts with Horizon exceeded 10 years.

    • The average deposit account balance at period end was less than $25,000 for consumer and commercial depositors and less than $195,000 for all accounts including those of large public depositors.

    • Horizon's loan–to–deposit ratio was 74.5% at period end, as total loans increased by an annualized rate of 8.3% year–to–date and a rate of 2.1% quarter over quarter, fueled by growth in commercial, consumer and residential balances.

    • Asset quality remained solid with total loan delinquency at 0.33% of total loans and net charge–offs to average loans of 0.01% during the quarter.

    • Non–interest expense of $34.5 million in the first quarter declined 3.3% from the linked quarter and 2.1% from the prior year period. Non–interest expense in the first quarter represented 1.79% of average assets on an annualized basis, improving from 1.84%, in the linked quarter and 1.95% in the prior year period.

    • Net income totaled $18.2 million, compared to $21.2 million in the fourth quarter of 2022 and $23.6 million in the prior year period. Diluted earnings per share (“EPS”) of $0.42 compared to $0.48 for the fourth quarter of 2022 and $0.54 for the first quarter of 2022.

    • Deposit betas increased to 51% on total interest bearing deposits in the first quarter compared to a 32% deposit beta during the previous quarter.

    • During the first quarter of 2023, unrealized losses on available for sale investments declined to $121.5 million compared to unrealized losses of $140.1 million at December 31, 2022. As a result our tangible capital ratio increased from 6.56% at December 31, 2022 to 6.87% at March 31, 2023.

    • Horizon's book value per share and tangible book value per share increased to $16.11 and $12.17 compared to $15.55 and $11.59 in the linked quarter and $15.55 and $11.54 in the first quarter of 2022.

    • The Bank’s capital position was still robust with leverage and risk based capital ratios of 8.86% and 13.15%, respectively.

    • Horizon's annualized dividend yield was 5.79% as of March 31, 2023.

    • On January 17, 2023, Horizon's Board of Directors approved the appointment of Thomas M. Prame to serve as the Chief Executive Officer of both Horizon and Horizon Bank (the “Bank”), effective June 1, 2023. Craig M. Dwight will retain the title of Chief Executive Officer until June 1, 2023 and retire as an employee from Horizon and the Bank effective July 3, 2023. Mr. Dwight will continue as the Chairman of the Board of Directors of both Horizon and the Bank.

    Summary

      For the Three Months Ended
      March 31, December 31, March 31,
    Net Interest Income and Net Interest Margin  2023   2022   2022 
    Net interest income $45,237  $48,782  $46,831 
    Net interest margin  2.67%  2.85%  2.90%
    Adjusted net interest margin  2.65%  2.83%  2.85%


      For the Three Months Ended
      March 31, December 31, March 31,
    Asset Yields and Funding Costs 2023  2022  2022 
    Interest earning assets 4.17% 3.88% 3.13%
    Interest bearing liabilities 1.85% 1.29% 0.30%


      For the Three Months Ended
    Non-interest Income and  March 31, December 31, March 31,
    Mortgage Banking Income  2023  2022  2022
    Total non–interest income $9,620 $10,674 $14,155
    Gain on sale of mortgage loans  785  1,196  2,027
    Mortgage servicing income net of impairment  713  637  3,489


      For the Three Months Ended
      March 31, December 31, March 31,
    Non-interest Expense  2023   2022   2022 
    Total non–interest expense $34,524  $35,711  $35,270 
    Annualized non–interest expense to average assets  1.79%  1.84%  1.95%


      For the Three Months Ended
      March 31, December 31, March 31,
    Credit Quality 2023  2022  2022 
    Allowance for credit losses to total loans 1.17% 1.21% 1.41%
    Non–performing loans to total loans 0.47% 0.52% 0.54%
    Percent of net charge–offs to average loans outstanding for the period 0.01% 0.01% 0.00%


      March 31, Net Reserve December 31,
    Allowance for Credit Losses  2023  1Q23  2022 
    Commercial $31,156  $(1,289) $32,445 
    Retail Mortgage  4,447   (1,130)  5,577 
    Warehouse  798   (222)  1,020 
    Consumer  13,125   1,703   11,422 
    Allowance for Credit Losses (“ACL”) $49,526  $(938) $50,464 
    ACL / Total Loans  1.17%    1.21%
    Acquired Loan Discount (“ALD”) $6,158  $(121) $6,279 
                 

    “Horizon's first quarter profitability metrics included net income of $18.2 million, return on average assets of 0.94% and return on average tangible equity of 14.18%, which were impacted by the effects of industry wide competition for deposits and the rising interest rate environment,” Mr. Dwight said. “Looking ahead, we believe Horizon will continue to benefit from new loan originations replacing lower–yielding payoffs and paydowns, our liquidity position and prudent deposit pricing, continued expense management discipline, relatively low credit costs, and active management of our investment portfolio.”

    Income Statement Highlights

    Net income for the first quarter of 2023 was $18.2 million, or $0.42 diluted earnings per share, compared to $21.2 million, or $0.48, for the linked quarter and $23.6 million, or $0.54, for the prior year period.

    The change in net income for the first quarter of 2023 when compared to the fourth quarter of 2022 reflects a decrease in non–interest expense of $1.2 million and lower income tax expense of $786,000, offset by a decrease in net interest income of $3.5 million, lower non–interest income of $1.1 million, which included a $500,000 loss on the sale of approximately $64.0 million of investment securities, and an increase in credit loss expense of $311,000.
      
    Non–interest expense of $34.5 million in the first quarter of 2023 reflected a $1.3 million decrease in salaries and employee benefits, a $268,000 decrease in outside services and consultants, a $215,000 decrease in data processing expense and a $163,000 decrease in loan expense, offset by a $369,000 increase in other expense from the linked quarter.

    Net income for the first quarter of 2023 compared to the same prior year period reflects a decrease in non–interest income of $4.5 million, a decrease in net interest income of $1.6 million, and an increase in credit loss expense of $1.6 million. These results are offset by a decrease in income tax expense of $1.7 million and a decrease in non–interest expense of $746,000.

    Net Interest Margin

    Horizon’s net interest margin was 2.67% for the first quarter of 2023 compared to 2.85% for the fourth quarter of 2022. The decrease in net interest margin reflects an increase in the cost of interest bearing liabilities of 56 basis points, offset by an increase in the yield on interest earning assets of 29 basis points. Additionally, interest income from acquisition–related purchase accounting adjustments was $64,000 lower during the first quarter of 2023 when compared to the fourth quarter of 2022.

    Net interest margin was 2.67% for the first quarter of 2023 compared to 2.90% for the first quarter of 2022. The decrease in net interest margin reflects an increase in the cost of interest bearing liabilities of 155 basis points, offset by an increase in the yield on interest earning assets of 104 basis points. Additionally, interest income from acquisition–related purchase accounting adjustments was $549,000 lower during the first quarter of 2023 when compared to the first quarter of 2022.

    Net interest margin, excluding acquisition–related purchase accounting adjustments (“adjusted net interest margin”), was 2.65% for the first quarter of 2023, compared to 2.83% for the linked quarter and 2.85% for the first quarter of 2022. Interest income from acquisition–related purchase accounting adjustments was $367,000, $431,000 and $916,000 for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively. (See the “Non–GAAP Reconciliation of Net Interest Margin” table below).

    Lending Activity

    Total loan balances and loans held for sale increased to $4.25 billion on March 31, 2023 compared to $4.16 billion on December 31, 2022. During the three months ended March 31, 2023, commercial loans increased $38.0 million, consumer loans increased $58.3 million, and residential mortgage loans increased $9.2 million, offset by decreases in mortgage warehouse loans of $16.6 million and loans held for sale of $3.4 million.

    Loan Growth by Type
    (Dollars in Thousands, Unaudited)
     March 31, December 31, QTD QTD Annualized
      2023  2022 $ Change % Change % Change
    Commercial$2,505,459 $2,467,422 $38,037  1.5% 6.3%
    Residential mortgage 662,459  653,292  9,167  1.4% 5.7%
    Consumer 1,026,076  967,755  58,321  6.0% 24.4%
    Subtotal 4,193,994  4,088,469  105,525  2.6% 10.5%
    Loans held for sale 2,409  5,807  (3,398) (58.5)% (237.3)%
    Mortgage warehouse 52,957  69,529  (16,572) (23.8)% (96.7)%
    Total loans and loans held for sale$4,249,360 $4,163,805 $85,555  2.1% 8.3%
                    

    Deposit Activity

    Total deposit balances of $5.70 billion on March 31, 2023 declined 2.66% compared to $5.86 billion on December 31, 2022.

    Deposit Growth by Type
    (Dollars in Thousands, Unaudited)
     March 31, December 31, QTD QTD Annualized
      2023  2022 $ Change % Change % Change
    Non–interest bearing$1,231,845 $1,277,768 $(45,923) (3.6)% (14.6)%
    Interest bearing 3,402,525  3,582,891  (180,366) (5.0)% (20.4)%
    Time deposits 1,067,575  997,115  70,460  7.1% 28.7%
    Total deposits$5,701,945 $5,857,774 $(155,829) (2.7)% (10.8)%

    Expense Management

     Three Months Ended
     March 31,December 31, QTD QTD
      2023 2022  $ Change % Change
    Non–interest Expense       
    Salaries and employee benefits$18,712  $19,978  $(1,266) (6.3)%
    Net occupancy expenses 3,563   3,279   284  8.7%
    Data processing 2,669   2,884   (215) (7.5)%
    Professional fees 533   694   (161) (23.2)%
    Outside services and consultants 2,717   2,985   (268) (9.0)%
    Loan expense 1,118   1,281   (163) (12.7)%
    FDIC insurance expense 540   388   152  39.2%
    Core deposit intangible amortization 903   925   (22) (2.4)%
    Other losses 221   118   103  87.3%
    Other expense 3,548   3,179   369  11.6%
    Total non–interest expense$34,524  $35,711  $(1,187) (3.4)%
    Annualized non–interest expense to average assets 1.79%  1.84%    
                

    Total non–interest expense was $1.2 million lower in the first quarter of 2023 when compared to the fourth quarter of 2022. The decrease in expenses was primarily due to a decrease in salaries and employee benefits of $1.3 million from lower salary and incentive compensation expense, a decrease in outside services and consultants expense of $268,000 and a decrease in data processing expense of $215,000, offset by an increase in other expense of $369,000 and net occupancy expenses of $284,000.

     Three Months Ended
     March 31, March 31, QTD QTD
      2023   2022  $ Change % Change
    Non–interest Expense       
    Salaries and employee benefits$18,712  $19,735  $(1,023) (5.2)%
    Net occupancy expenses 3,563   3,561   2  0.1%
    Data processing 2,669   2,537   132  5.2%
    Professional fees 533   314   219  69.7%
    Outside services and consultants 2,717   2,525   192  7.6%
    Loan expense 1,118   1,205   (87) (7.2)%
    FDIC insurance expense 540   725   (185) (25.5)%
    Core deposit intangible amortization 903   926   (23) (2.5)%
    Other losses 221   168   53  31.5%
    Other expense 3,548   3,574   (26) (0.7)%
    Total non–interest expense$34,524  $35,270  $(746) (2.1)%
    Annualized non–interest expense to average assets 1.79%  1.95%    
                

    Total non–interest expense was $746,000 lower in the first quarter of 2023 when compared to the first quarter of 2022 primarily due to an decrease in salaries and incentive compensation expense of $1.0 million and a decrease in FDIC insurance expense of $185,000, offset by an increase in professional fees of $219,000 and outside services and consultants expense of $192,000.

    Annualized non–interest expense as a percent of average assets was 1.79%, 1.84% and 1.95% for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

    Income tax expense totaled $1.9 million for the first quarter of 2023, a decrease of $786,000 when compared to the fourth quarter of 2022 and a decrease of $1.7 million when compared to the first quarter of 2022.

    Capital

    The capital resources of the Company and the Bank exceeded regulatory capital ratios for “well capitalized” banks at March 31, 2023. Stockholders’ equity totaled $702.6 million at March 31, 2023 and the ratio of average stockholders’ equity to average assets was 8.86% for the three months ended March 31, 2023.

    Tangible book value, which excludes intangible assets from total equity, per common share (“TBVPS”) increased $0.58 during the three months ended March 31, 2023 to $12.17.

    The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of March 31, 2023.

     Actual Required for Capital Adequacy Purposes Required for Capital Adequacy Purposes with Capital Buffer Well Capitalized
    Under Prompt Corrective Action Provisions
     $ Ratio $ Ratio $ Ratio $ Ratio
    Total capital (to risk–weighted assets)               
    Consolidated$791,701 13.97% $453,270 8.00% $594,917 10.50% N/A N/A
    Bank 736,730 13.15%  448,323 8.00%  588,425 10.50% $560,404 10.00%
    Tier 1 capital (to risk–weighted assets)               
    Consolidated 742,175 13.10%  339,952 6.00%  481,599 8.50% N/A N/A
    Bank 687,204 12.26%  336,243 6.00%  476,344 8.50%  448,323 8.00%
    Common equity tier 1 capital (to risk–weighted assets)               
    Consolidated 621,647 10.97%  254,964 4.50%  396,611 7.00% N/A N/A
    Bank 687,241 12.26%  252,182 4.50%  392,283 7.00%  364,263 6.50%
    Tier 1 capital (to average assets)               
    Consolidated 742,175 10.06%  295,058 4.00%  295,058 4.00% N/A N/A
    Bank 687,204 8.86%  310,127 4.00%  310,127 4.00%  387,658 5.00%
                            

    Liquidity

    The Bank maintains a stable base of core deposits provided by long–standing and new relationships with individuals and local businesses. These deposits are the principal source of liquidity for Horizon. Other sources of liquidity for Horizon include earnings, loan repayments, investment security cash flows, 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”). On March 31, 2023, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $1.65 billion in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Bank. The Bank had approximately $666.3 million of unpledged investment securities on March 31, 2023.

    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: current financial conditions within the banking industry, including the effects of recent failures of other financial institutions, liquidity levels, and responses by the Federal Reserve, Department of the Treasury, and the Federal Deposit Insurance Corporation to address these issues; 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; the ability of Horizon to remediate its material weaknesses in its internal control over financial reporting; 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 website (www.sec.gov). 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)
      
     March 31, December 31, September 30, June 30, March 31,
      2023  2022  2022  2022  2022
    Balance sheet:         
    Total assets$7,897,995 $7,872,518 $7,718,695 $7,640,936 $7,420,328
    Interest earning deposits & federal funds sold 30,221  12,233  7,302  5,646  20,827
    Interest earning time deposits 3,098  2,812  2,814  3,799  4,046
    Investment securities 2,958,978  3,020,306  3,017,191  3,093,792  3,118,641
    Commercial loans 2,505,459  2,467,422  2,403,743  2,363,991  2,259,327
    Mortgage warehouse loans 52,957  69,529  73,690  116,488  105,118
    Residential mortgage loans 662,459  653,292  634,901  608,582  593,372
    Consumer loans 1,026,076  967,755  919,198  866,819  768,854
    Total loans 4,246,951  4,157,998  4,031,532  3,955,880  3,726,671
    Earning assets 7,273,921  7,225,833  7,087,368  7,088,737  6,898,208
    Non–interest bearing deposit accounts 1,231,845  1,277,768  1,315,155  1,328,213  1,325,570
    Interest bearing transaction accounts 3,402,525  3,582,891  3,736,798  3,760,890  3,782,644
    Time deposits 1,067,575  997,115  778,885  756,482  743,283
    Total deposits 5,701,945  5,857,774  5,830,838  5,845,585  5,851,497
    Borrowings 1,311,927  1,142,949  1,048,091  959,222  728,664
    Subordinated notes 58,933  58,896  58,860  58,823  58,786
    Junior subordinated debentures issued to capital trusts 57,087  57,027  56,966  56,907  56,850
    Total stockholders’ equity 702,559  677,375  644,993  657,865  677,450


    Financial Highlights
    (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
     Three Months Ended
     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022   2022 
    Income statement:         
    Net interest income$45,237  $48,782  $53,395  $53,008  $48,171 
    Credit loss expense (recovery) 242   (69)  (601)  240   (1,386)
    Non–interest income 9,620   10,674   10,188   12,434   14,155 
    Non–interest expense 34,524   35,711   38,350   36,368   36,610 
    Income tax expense 1,863   2,649   2,013   3,975   3,539 
    Net income$18,228  $21,165  $23,821  $24,859  $23,563 
              
    Per share data:         
    Basic earnings per share$0.42  $0.49  $0.55  $0.57  $0.54 
    Diluted earnings per share 0.42   0.48   0.55   0.57   0.54 
    Cash dividends declared per common share 0.16   0.16   0.16   0.16   0.15 
    Book value per common share 16.11   15.55   14.80   15.10   15.55 
    Tangible book value per common share 12.17   11.59   10.82   11.11   11.54 
    Market value – high 16.32   20.00   20.59   19.21   23.54 
    Market value – low$10.31  $14.51  $16.74  $16.72  $18.67 
    Weighted average shares outstanding – Basis 43,583,554   43,574,151   43,573,370   43,572,796   43,554,713 
    Weighted average shares outstanding – Diluted 43,744,721   43,667,953   43,703,793   43,684,691   43,734,556 
              
    Key ratios:         
    Return on average assets 0.94%  1.09%  1.24%  1.33%  1.31%
    Return on average common stockholders’ equity 10.66   12.72   13.89   14.72   13.34 
    Net interest margin 2.67   2.85   3.04   3.13   2.90 
    Allowance for credit losses to total loans 1.17   1.21   1.27   1.32   1.41 
    Average equity to average assets 8.86   8.55   8.91   9.06   9.79 
    Efficiency ratio 62.93   60.06   59.33   54.91   57.83 
    Annualized non–interest expense to average assets 1.74   1.84   1.91   1.90   1.95 
    Bank only capital ratios:         
    Tier 1 capital to average assets 8.86   8.89   8.84   8.85   8.83 
    Tier 1 capital to risk weighted assets 12.26   12.72   12.74   12.87   13.23 
    Total capital to risk weighted assets 13.15   13.59   13.65   13.83   14.25 


    Financial Highlights
    (Dollars in Thousands Except Ratios, Unaudited)
      
     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022   2022 
    Loan data:         
    Substandard loans$49,804  $56,194  $57,932  $59,377  $57,928 
    30 to 89 days delinquent 13,971   10,709   6,970   6,739   6,358 
              
    Non–performing loans:         
    90 days and greater delinquent – accruing interest 137   92   193   210   107 
    Trouble debt restructures – accruing interest —   2,570   2,529   2,535   2,372 
    Trouble debt restructures – non–accrual —   1,548   1,665   1,345   1,501 
    Non–accrual loans 19,660   17,630   14,771   16,116   16,133 
    Total non–performing loans$19,797  $21,840  $19,158  $20,206  $20,113 
    Non–performing loans to total loans 0.47%  0.52%  0.47%  0.51%  0.54%


    Allocation of the Allowance for Credit Losses
    (Dollars in Thousands, Unaudited)
      
     March 31, December 31, September 30, June 30, March 31,
      2023  2022  2022  2022  2022
    Commercial$31,156 $32,445 $33,806 $34,802 $37,789
    Residential mortgage 4,447  5,577  5,137  4,422  4,351
    Mortgage warehouse 798  1,020  1,024  1,067  1,055
    Consumer 13,125  11,422  11,402  12,059  9,313
    Total$49,526 $50,464 $51,369 $52,350 $52,508


    Net Charge–offs (Recoveries)
    (Dollars in Thousands Except Ratios, Unaudited)
      
     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022   2022 
    Commercial$104  $(94) $51  $(75) $38 
    Residential mortgage (6)  (8)  (75)  40   (10)
    Mortgage warehouse —   —   —   —   — 
    Consumer 281   387   162   319   108 
    Total$379  $285  $138  $284  $136 
    Percent of net charge–offs (recoveries) to average loans outstanding for the period 0.01%  0.01%  0.00%  0.01%  0.00%


    Total Non–performing Loans
    (Dollars in Thousands Except Ratios, Unaudited)
      
     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022   2022 
    Commercial$8,523  $9,330  $7,199  $8,008  $7,844 
    Residential mortgage 6,926   8,123   8,047   8,469   8,584 
    Mortgage warehouse —   —   —   —   — 
    Consumer 4,348   4,387   3,912   3,729   3,685 
    Total$19,797  $21,840  $19,158  $20,206  $20,113 
    Non–performing loans to total loans 0.47%  0.52%  0.47%  0.51%  0.54%


    Other Real Estate Owned and Repossessed Assets
    (Dollars in Thousands, Unaudited)
      
     March 31, December 31, September 30, June 30, March 31,
      2023  2022  2022  2022  2022
    Commercial$1,567 $1,881 $3,206 $1,414 $2,245
    Residential mortgage 203  107  22  —  170
    Mortgage warehouse —  —  —  —  —
    Consumer 78  152  14  58  5
    Total$1,848 $2,140 $3,242 $1,472 $2,420


    Average Balance Sheets
    (Dollars in Thousands, Unaudited)
     Three Months Ended Three Months Ended
     March 31, 2023 March 31, 2022
     Average
    Balance    		 Interest Average
    Rate    		 Average
    Balance    		 Interest Average
    Rate
    Assets           
    Interest earning assets           
    Federal funds sold$7,767  $83 4.33% $237,605  $91 0.16%
    Interest earning deposits 8,780   70 3.23%  20,673   24 0.47%
    Investment securities – taxable 1,727,369   8,725 2.05%  1,646,525   7,391 1.82%
    Investment securities – non–taxable (1) 1,314,129   7,556 2.95%  1,279,082   6,697 2.69%
    Loans receivable (2) (3) 4,143,221   55,364 5.44%  3,630,871   36,539 4.10%
    Total interest earning assets 7,201,266   71,798 4.17%  6,814,756   50,742 3.13%
    Non–interest earning assets           
    Cash and due from banks 103,563       104,676     
    Allowance for credit losses (50,337)      (54,307)    
    Other assets 576,614       454,550     
    Total average assets$7,831,106      $7,319,675     
                
    Liabilities and Stockholders’ Equity           
    Interest bearing liabilities           
    Interest bearing deposits$4,502,199  $14,819 1.33% $4,478,621  $1,496 0.14%
    Borrowings 1,053,317   9,268 3.57%  503,846   1,043 0.84%
    Repurchase agreements 138,749   503 1.47%  139,742   37 0.11%
    Subordinated notes 58,910   880 6.06%  58,763   880 6.07%
    Junior subordinated debentures issued to capital trusts 57,048   1,091 7.76%  56,807   455 3.25%
    Total interest bearing liabilities 5,810,223   26,561 1.85%  5,237,779   3,911 0.30%
    Non–interest bearing liabilities           
    Demand deposits 1,255,697       1,322,781     
    Accrued interest payable and other liabilities 71,714       42,774     
    Stockholders’ equity 693,472       716,341     
    Total average liabilities and stockholders’ equity$7,831,106      $7,319,675     
                
    Net interest income / spread  $45,237 2.32%   $46,831 2.83%
    Net interest income as a percent of average interest earning assets (1)    2.67%     2.90%
                
    (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)
        
     March 31,
    2023    		 December 31,
    2022
     (Unaudited)  
    Assets   
    Cash and due from banks$134,722  $123,505 
    Interest earning time deposits 3,098   2,812 
    Investment securities, available for sale 943,441   997,558 
    Investment securities, held to maturity (fair value $1,709,392 and $1,681,309) 2,015,537   2,022,748 
    Loans held for sale 2,409   5,807 
    Loans, net of allowance for credit losses of $49,526 and $50,464 4,197,425   4,107,534 
    Premises and equipment, net 91,814   92,677 
    Federal Home Loan Bank stock 32,264   26,677 
    Goodwill 155,211   155,211 
    Other intangible assets 16,336   17,239 
    Interest receivable 36,428   35,294 
    Cash value of life insurance 147,156   146,175 
    Other assets 122,154   139,281 
    Total assets$7,897,995  $7,872,518 
        
    Liabilities   
    Deposits   
    Non–interest bearing$1,231,845  $1,277,768 
    Interest bearing 4,470,100   4,580,006 
    Total deposits 5,701,945   5,857,774 
    Borrowings 1,311,927   1,142,949 
    Subordinated notes 58,933   58,896 
    Junior subordinated debentures issued to capital trusts 57,087   57,027 
    Interest payable 5,922   5,380 
    Other liabilities 59,622   73,117 
    Total liabilities 7,195,436   7,195,143 
    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 44,041,213 and 43,937,889 shares    		 —   — 
    Additional paid–in capital 354,035   354,188 
    Retained earnings 440,556   429,385 
    Accumulated other comprehensive income (loss) (92,032)  (106,198)
    Total stockholders’ equity 702,559   677,375 
    Total liabilities and stockholders’ equity$7,897,995  $7,872,518 
            


    Condensed Consolidated Statements of Income
    (Dollars in Thousands Except Per Share Data, Unaudited)
     Three Months Ended
     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022  2022 
    Interest income         
    Loans receivable$55,364  $50,859  $45,517  $40,585 $36,539 
    Investment securities – taxable 8,725   8,702   8,436   8,673  7,391 
    Investment securities – non–taxable 7,556   7,543   7,478   7,307  6,697 
    Other 153   83   65   43  115 
    Total interest income 71,798   67,187   61,496   56,608  50,742 
    Interest expense         
    Deposits 14,819   10,520   4,116   1,677  1,496 
    Borrowed funds 9,771   6,040   3,895   1,450  1,080 
    Subordinated notes 880   881   880   881  880 
    Junior subordinated debentures issued capital trusts 1,091   964   744   556  455 
    Total interest expense 26,561   18,405   9,635   4,564  3,911 
    Net interest income 45,237   48,782   51,861   52,044  46,831 
    Credit loss expense (recovery) 242   (69)  (601)  240  (1,386)
    Net interest income after credit loss expense 44,995   48,851   52,462   51,804  48,217 
    Non–interest Income         
    Service charges on deposit accounts 3,028   2,947   3,023   2,833  2,795 
    Wire transfer fees 109   118   148   170  159 
    Interchange fees 2,867   2,951   3,089   3,582  2,780 
    Fiduciary activities 1,275   1,270   1,203   1,405  1,503 
    Losses on sale of investment securities (500)  —   —   —  — 
    Gain on sale of mortgage loans 785   1,196   1,441   2,501  2,027 
    Mortgage servicing income net of impairment 713   637   355   319  3,489 
    Increase in cash value of bank owned life insurance 981   751   814   519  510 
    Death benefit on bank owned life insurance —   —   —   644  — 
    Other income 362   804   115   461  892 
    Total non–interest income 9,620   10,674   10,188   12,434  14,155 
    Non–interest expense         
    Salaries and employee benefits 18,712   19,978   20,613   19,957  19,735 
    Net occupancy expenses 3,563   3,279   3,293   3,190  3,561 
    Data processing 2,669   2,884   2,539   2,607  2,537 
    Professional fees 533   694   552   283  314 
    Outside services and consultants 2,717   2,985   2,855   2,485  2,525 
    Loan expense 1,118   1,281   1,392   1,533  1,205 
    FDIC insurance expense 540   388   670   775  725 
    Core deposit intangible amortization 903   925   926   925  926 
    Other losses 221   118   398   362  168 
    Other expenses 3,548   3,179   3,578   3,287  3,574 
    Total non–interest expense 34,524   35,711   36,816   35,404  35,270 
    Income before income taxes 20,091   23,814   25,834   28,834  27,102 
    Income tax expense 1,863   2,649   2,013   3,975  3,539 
    Net income$18,228  $21,165  $23,821  $24,859 $23,563 
    Basic earnings per share$0.42  $0.49  $0.55  $0.57 $0.54 
    Diluted earnings per share 0.42   0.48   0.55   0.57  0.54 
                       

    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 net income, net interest margin, tangible stockholders’ equity and tangible book value per share, efficiency ratio, the return on average assets, the return on average common equity, and 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
     March 31, December 31, September 30, June 30, March 31,
      2023   2022  2022  2022   2022
    Net income as reported$18,228  $21,165 $23,821 $24,859  $23,563
    (Gain) / loss on sale of investment securities 500   —  —  —   —
    Tax effect (105)  —  —  —   —
    Net income excluding (gain) / loss on sale of investment securities 18,623   21,165  23,821  24,859   23,563
    Death benefit on bank owned life insurance (“BOLI”) —   —  —  (644)  —
    Net income excluding death benefit on BOLI 18,623   21,165  23,821  24,215   23,563
    Adjusted net income$18,623  $21,165 $23,821 $24,215  $23,563


    Non–GAAP Reconciliation of Diluted Earnings per Share
    (Dollars in Thousands, Unaudited)
     Three Months Ended
     March 31, December 31, September 30, June 30, March 31,
      2023  2022  2022  2022   2022
    Diluted earnings per share (“EPS”) as reported$0.42 $0.48 $0.55 $0.57  $0.54
    (Gain) / loss on sale of investment securities 0.01  —  —  —   —
    Tax effect —  —  —  —   —
    Diluted EPS excluding (gain) / loss on sale of investment securities 0.43  0.48  0.55  0.57   0.54
    Death benefit on bank owned life insurance (“BOLI”) —  —  —  (0.01)  —
    Adjusted diluted EPS$0.43 $0.48 $0.55 $0.56  $0.54


    Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income
    (Dollars in Thousands, Unaudited)
     Three Months Ended
     March 31, December 31, September 30, June 30, March 31,
      2023  2022   2022   2022   2022 
    Pre–tax income$20,091 $23,814  $25,834  $28,834  $27,102 
    Credit loss expense (recovery) 242  (69)  (601)  240   (1,386)
    Pre–tax, pre–provision net income$20,333 $23,745  $25,233  $29,074  $25,716 
              
    Pre–tax, pre–provision net income$20,333 $23,745  $25,233  $29,074  $25,716 
    (Gain) / loss on sale of investment securities 500  —   —   —   — 
    Death benefit on BOLI —  —   —   (644)  — 
    Adjusted pre–tax, pre–provision net income$20,833 $23,745  $25,233  $28,430  $25,716 


    Non–GAAP Reconciliation of Net Interest Margin
    (Dollars in Thousands, Unaudited)
     Three Months Ended
     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022   2022 
    Net interest income as reported$45,237  $48,782  $51,861  $52,044  $46,831 
    Average interest earning assets 7,201,266   7,091,980   7,056,208   6,943,633   6,814,756 
    Net interest income as a percentage of average interest earning assets (“Net Interest Margin”) 2.67%  2.85%  3.04%  3.13%  2.90%
              
    Net interest income as reported$45,237  $48,782  $51,861  $52,044  $46,831 
    Acquisition–related purchase accounting adjustments (“PAUs”) (367)  (431)  (906)  (1,223)  (916)
    Adjusted net interest income$44,870  $48,351  $50,955  $50,821  $45,915 
    Adjusted net interest margin 2.65%  2.83%  2.99%  3.06%  2.85%


    Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share
    (Dollars in Thousands, Unaudited)
      
     March 31, December 31, September 30, June 30, March 31,
      2023  2022  2022  2022  2022
    Total stockholders’ equity$702,559 $677,375 $644,993 $657,865 $677,450
    Less: Intangible assets 171,547  172,450  173,375  173,662  174,588
    Total tangible stockholders’ equity$531,012 $504,925 $471,618 $484,203 $502,862
    Common shares outstanding 43,621,422  43,574,151  43,574,151  43,572,796  43,572,796
    Book value per common share$16.11 $15.55 $14.80 $15.10 $15.55
    Tangible book value per common share$12.17 $11.59 $10.82 $11.11 $11.54


    Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
    (Dollars in Thousands, Unaudited)
     Three Months Ended
     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022   2022 
    Non–interest expense as reported$34,524  $35,711  $36,816  $35,404  $35,270 
    Net interest income as reported 45,237   48,782   51,861   52,044   46,831 
    Non–interest income as reported$9,620  $10,674  $10,188  $12,434  $14,155 
    Non–interest expense / (Net interest income + Non–interest income)
    (“Efficiency Ratio”)    		 62.93%  60.06%  59.33%  54.91%  57.83%
              
    Non–interest expense as reported$34,524  $35,711  $36,816  $35,404  $35,270 
              
    Net interest income as reported 45,237   48,782   51,861   52,044   46,831 
              
    Non–interest income as reported 9,620   10,674   10,188   12,434   14,155 
    (Gain) / loss on sale of investment securities 500   —   —   —   — 
    Death benefit on BOLI —   —   —   (644)  — 
    Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI$10,120  $10,674  $10,188  $11,790  $14,155 
    Adjusted efficiency ratio 62.37%  60.06%  59.33%  55.46%  57.83%


    Non–GAAP Reconciliation of Return on Average Assets
    (Dollars in Thousands, Unaudited)
     Three Months Ended
     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022   2022 
    Average assets$7,831,106  $7,718,366  $7,635,102  $7,476,238  $7,319,675 
    Return on average assets (“ROAA”) as reported 0.94%  1.09%  1.24%  1.33%  1.31%
    (Gain) / loss on sale of investment securities 0.03   —   —   —   — 
    Tax effect (0.01)  —   —   —   — 
    ROAA excluding (gain) / loss on sale of investment securities 0.96   1.09   1.24   1.33   1.31 
    Death benefit on BOLI —   —   —   (0.03)  — 
    ROAA excluding death benefit on BOLI 0.96   1.09   1.24   1.30   1.31 
    Adjusted ROAA 0.96%  1.09%  1.24%  1.30%  1.31%


    Non–GAAP Reconciliation of Return on Average Common Equity
    (Dollars in Thousands, Unaudited)
     Three Months Ended
     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022   2022 
    Average common equity$693,472  $660,188  $680,376  $677,299  $716,341 
    Return on average common equity (“ROACE”) as reported 10.66%  12.72%  13.89%  14.72%  13.34%
    (Gain) / loss on sale of investment securities 0.29   —   —   —   — 
    Tax effect (0.06)  —   —   —   — 
    ROACE excluding (gain) / loss on sale of investment securities 10.89   12.72   13.89   14.72   13.34 
    Death benefit on BOLI —   —   —   (0.38)  — 
    ROACE excluding death benefit on BOLI 10.89   12.72   13.89   14.34   13.34 
    Adjusted ROACE 10.89%  12.72%  13.89%  14.34%  13.34%


    Non–GAAP Reconciliation of Return on Average Tangible Equity
    (Dollars in Thousands, Unaudited)
     Three Months Ended
     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022   2022 
    Average common equity$693,472  $660,188  $680,376  $677,299  $716,341 
    Less: Average intangible assets 172,139   173,050   173,546   175,321   176,356 
    Average tangible equity$521,333  $487,138  $506,830  $501,978  $539,985 
    Return on average tangible equity (“ROATE”) as reported 14.18%  17.24%  18.65%  19.86%  17.70%
    (Gain) / loss on sale of investment securities 0.39   —   —   —   — 
    Tax effect (0.08)  —   —   —   — 
    ROATE excluding (gain) / loss on sale of investment securities 14.49   17.24   18.65   19.86   17.70 
    Death benefit on BOLI —   —   —   (0.51)  — 
    ROATE excluding death benefit on BOLI 14.49   17.24   18.65   19.35   17.70 
    Adjusted ROATE 14.49%  17.24%  18.65%  19.35%  17.70%
                        

    Earnings Conference Call

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

    Participants may access the live conference call on April 27, 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 May 4, 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 6349380.

    About Horizon Bancorp, Inc.

    Celebrating 150 years, Horizon Bancorp, Inc. (NASDAQ GS: HBNC) is the $7.9 billion–asset commercial 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 Bank’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:April 26, 2023

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