• Horizon Bancorp, Inc. Reports Third Quarter 2022 EPS of $0.55; Strong Loan Growth Continues to Offset Non–interest Income and Expense Headwinds

    Source: Nasdaq GlobeNewswire / 26 Oct 2022 15:35:02   America/Chicago

    MICHIGAN CITY, Ind., Oct. 26, 2022 (GLOBE NEWSWIRE) -- (NASDAQ GS: HBNC) – Horizon Bancorp, Inc. (“Horizon” or the “Company”) announced its unaudited financial results for the three– and nine–months ending September 30, 2022.

    “We are proud of the performance achieved by our business banking and consumer lending teams who delivered annualized loan growth of 7.8% in the third quarter, excluding PPP loans and sold commercial participation loans,” Chairman and CEO Craig M. Dwight said. “This continued strong loan growth led to the increase in net interest income and substantially offset headwinds from lower residential mortgage lending activity and lower wealth management fees, as well as the increase in cost of funds related to rapidly rising interest rates. While the current economic environment remains challenged by rising inflation and supply chain disruption, we remain focused on positioning ourselves to continue to meet the evolving needs of our customers. We believe our investments in talent to enhance our capabilities and prepare for the future support our disciplined growth trajectory, and with the benefit of our balance sheet strength and solid asset quality metrics, will continue to elevate our performance through the end of 2022 and into 2023.”

    Third Quarter 2022 Highlights

    • Return on average assets (“ROAA”) was 1.29% year–to–date and 1.24% for the third quarter.

    • Return on average tangible equity was 18.73% year–to–date and 18.71% for the third quarter.

    • Total loans, excluding Federal Paycheck Protection Program (“PPP”) loans and sold commercial participation loans, grew by an annualized rate of 14.5% year–to–date and an annualized rate of 7.8% quarter over quarter.

    • Commercial loans, excluding PPP loans and sold commercial participation loans, grew by an annualized rate of 13.8% year–to–date and an annualized rate of 7.2% quarter over quarter to a record $2.35 billion.

    • Consumer loans grew by an annualized rate of 31.7% year–to–date and an annualized rate of 23.9% quarter over quarter to a record $899.9 million at period end.

    • Asset quality remains solid with total loan delinquency at 0.12% of total loans, net charge–offs to average loans of 0.00% and a reversal of credit loss expense during the quarter.

    • Net interest income increased by $387,000 to $53.4 million during the third quarter compared to $53.0 million for the previous quarter.

    • Reported net interest margin (“NIM”) was 3.13% and adjusted NIM was 3.08%, with reported NIM decreasing by six basis points and adjusted NIM decreasing by four basis points from the second quarter of 2022. (See the “Non–GAAP Reconciliation of Net Interest Margin” table below for the definition of this non–GAAP calculation of adjusted NIM.)

    • Non–interest income is down $2.2 million for the quarter due to lower residential mortgage loan volume, resulting in lower gain on sale income and from lower wealth management fees related to year–to–date declines in equity and bond markets.

    • Non-interest expense was $38.4 million in the quarter, or 1.99% of average assets on an annualized basis, compared to $36.4 million, or 1.95%, in the second quarter of 2022. Year–to–date non–interest expense continues to be well managed at $111.3 million, or 1.99% of average assets on an annualized basis which is below our target of 2.00% of average assets.

    • The effective tax rate for the third quarter dropped to 7.8% due to the recognition of solar tax credits as projects were put into service during the quarter.

    • Net income totaled $23.8 million, down 4.2% from the linked quarter and up 3.3% from the prior year period. Diluted earnings per share (“EPS”) of $0.55 was down from $0.57 for the second quarter of 2022 and up from $0.52 for the third quarter of 2021.

    • Asset sensitivity decreased in the quarter compared to the previous quarter end, as deposit betas increased with rising rates. Deposit beta is defined as the change in deposit costs as a percentage of the change in Fed Funds over a particular period. Current estimates for parallel rate shocks to the balance sheet, at 100 basis points and 200 basis points, decrease net interest income by approximately $3.3 million and $6.7 million, respectively.

    • Deposit betas increased to 23% on total interest bearing deposits in the third quarter compared to a 3% beta during the previous quarter.

    • During the third quarter of 2022, the continued steepening of the yield curve resulted in unrealized losses on available for sale investments of $161.8 million compared to unrealized losses of $122.0 million at June 30, 2022. The impact to the tangible capital ratio was a decrease of 3.55% from 6.48% at June 30, 2022 to 6.25% at September 30, 2022.

    • The Bank’s capital position is still robust with leverage and risk based capital ratios of 8.84% and 13.65%, respectively. The annualized dividend yield was 3.56% as of September 30, 2022.

    Summary

      For the Three Months Ended
      September 30, June 30, September 30,
    Net Interest Income and Net Interest Margin  2022   2022   2021 
    Net interest income $53,395  $53,008  $46,544 
    Net interest margin  3.13%  3.19%  3.17%
    Adjusted net interest margin  3.08%  3.12%  3.12%

    Mr. Dwight continued, “Net interest income increased by $387,000 for the quarter as a result of Horizon’s solid loan growth. To support this level of growth, we were required to increase borrowings and that impacted the adjusted net interest margin by four basis points during the quarter. Overall cost of funds was contained at 0.69% providing a strong spread for new loans coming on the books. Competitive pressure on deposit pricing is starting to accelerate as we see several smaller banks and credit unions aggressively seeking lower cost deposit funding. Horizon’s deposit betas were 23% for the third quarter and in line with our expectations of approximately 35%; however additional pressure is expected as the Board of Governors of the Federal Reserve System will likely continue to rapidly increase rates over the next several months.”

      For the Three Months Ended
      September 30, June 30, September 30,
    Asset Yields and Funding Costs 2022
    		 2022
    		 2021
    Interest earning assets 3.68% 3.46% 3.46%
    Interest bearing liabilities 0.69% 0.34% 0.38%


      For the Three Months Ended
    Non-interest Income and September 30, June 30, September 30,
    Mortgage Banking Income 2022 2022 2021
    Total non–interest income $10,188 $12,434 $16,044
    Gain on sale of mortgage loans  1,441  2,501  4,088
    Mortgage servicing income net of impairment  355  319  336


      For the Three Months Ended
      September 30, June 30, September 30,
    Non-interest Expense  2022   2022   2021 
    Total non–interest expense $38,350  $36,368  $34,349 
    Annualized non–interest expense to average assets  1.99%  1.95%  2.09%


      For the Three Months Ended
      September 30, June 30, September 30,
    Credit Quality 2022
    		 2022
    		 2021
    Allowance for credit losses to total loans 1.28% 1.33% 1.55%
    Non–performing loans to total loans 0.48% 0.51% 0.80%
    Percent of net charge–offs to average loans outstanding for the period 0.00% 0.01% 0.00%


      September 30, Net Reserve December 31,
    Allowance for Credit Losses  2022  3Q22 2Q22 1Q22  2021 
    Commercial $33,806  $(996) $(2,987) $(2,986) $40,775 
    Retail Mortgage  5,137   715   71   495   3,856 
    Warehouse  1,024   (43)  12   (4)  1,059 
    Consumer  11,402   (657)  2,746   717   8,596 
    Allowance for Credit Losses (“ACL”) $51,369  $(981) $(158) $(1,778) $54,286 
    ACL / Total Loans  1.28%        1.51%
    Acquired Loan Discount (“ALD”) $6,587  $(619) $(1,122) $(769) $9,097 

    “Our results this quarter were positively impacted by the significant progress towards achieving our goal of an annualized non–interest expense to average assets ratio of less than 2.00%, at 1.99% for the period ended September 30, 2022," Mr. Dwight continued. “We remain disciplined and focused on expense management, a critical component of our strategy given the economic uncertainty and rise in inflation. However, we are confident in our ability to continue to reduce our annualized target to be less than 2.00%. We expect the higher expense run rate we incurred during the third quarter to be greatly reduced starting in Q1 2023. In addition, in 2023 we expect to see the benefit from a full year of seven additional branch closings and their related cost savings.”

    Income Statement Highlights

    Net income for the third quarter of 2022 was $23.8 million, or $0.55 diluted earnings per share, compared to $24.9 million, or $0.57, for the linked quarter and $23.1 million, or $0.52, for the prior year period.

    Adjusted net income for the third quarter of 2022 was $23.8 million, or $0.55 diluted earnings per share, compared to $24.2 million, or $0.56, for the linked quarter and $23.0 million, or $0.52, for the prior year period. Adjusted net income, which is not calculated according to generally accepted accounting principles (“GAAP”), is a measure that Horizon uses to provide a greater understanding of operating profitability. (See the “Non–GAAP Reconciliation of Net Income” table below.)

    The improvement in net income for the third quarter of 2022 compared to the same prior year period reflects an increase in net interest income of $6.9 million, a decrease in credit loss expense of $1.7 million and a decrease in income tax expense of $2.0 million. These results are offset by a decrease in non–interest income of $5.9 million and an increase in non–interest expense of $4.0 million.
    Net income for the third quarter of 2022 compared to the second quarter of 2022 reflects expansion of net interest income of $387,000, improvement in credit loss expense of $841,000 and a decrease of income tax expense of $2.0 million. These items were offset by lower non–interest income of $2.2 million and an increase in non–interest expense of $2.0 million.

    Third quarter 2022 income from the gain on sale of mortgage loans totaled $1.4 million, down from $2.5 million in the linked quarter and down from $4.1 million in the prior year period.

    Certain revenue streams that generated higher income in the prior year quarter were replaced in the most recent quarter with earning assets that have higher margins. Income from PPP lending, gain on sale of mortgage loans and mortgage servicing income net of impairment totaled $7.9 million during the prior year quarter. For the quarter ending September 30, 2022, the income from those same revenue streams totaled $1.8 million. The ability to replace this income and increase overall gross income in the third quarter was attributed to the strategies management implemented to focus on higher earning assets.

    Non–interest expense of $38.4 million in the third quarter of 2022 reflected a $656,000 increase in salaries and employee benefits, a $429,000 increase in loan expense, a $370,000 increase in outside services and consultants, a $292,000 increase in other expense and a $269,000 increase in professional fees from the linked quarter.

    Pre–tax, pre–provision net income totaled $25.2 million, down 13.2% from the linked quarter and 10.6% from the prior year period. This non–GAAP financial measure is utilized by many banks to provide a greater understanding of pre–tax profitability before the impact of credit loss expense. (See the “Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income” table below.) Horizon recorded a provision release of $601,000 in the quarter, a provision expense of $240,000 in the linked quarter, and a provision expense of $1.1 million in the prior year period.

    Net Interest Margin

    Horizon’s net interest margin decreased to 3.13% for the third quarter of 2022 compared to 3.19% for the second quarter of 2022. The decrease in net interest margin reflects the impact of the increase in the cost of interest bearing liabilities of 35 basis points which was partially offset by the increase in the yield on interest earning assets of 22 basis points. Interest income from acquisition–related purchase accounting adjustments was $317,000 lower during the third quarter of 2022 when compared to the second quarter of 2022.

    Net interest margin decreased to 3.13% for the third quarter of 2022 compared to 3.17% for the third quarter of 2021. The decrease in net interest margin reflects the impact of the increased cost of interest bearing liabilities of 31 basis points which was partially offset by the increase in the yield on interest earning assets of 22 basis points.

    Adjusted net interest margin, which excludes acquisition–related purchase accounting adjustments, was 3.08% for the third quarter of 2021, compared to 3.12% for the linked quarter and 3.12% for the third quarter of 2021. Interest income from acquisition–related purchase accounting adjustments was $906,000, $1.2 million and $875,000 for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

    Lending Activity

    Total loan balances increased to $4.01 billion, or $3.96 billion excluding PPP loans and sold commercial participation loans, on September 30, 2022 when compared to $3.94 billion, or $3.89 billion excluding PPP loans and sold commercial participation loans, on June 30, 2022. During the three months ended September 30, 2022, commercial loans, excluding PPP loans and sold commercial participation loans, increased $41.8 million, consumer loans increased $51.1 million, and residential mortgage loans increased $26.3 million, offset by decreases in mortgage warehouse loans of $42.8 million, PPP loans of $2.0 million and loans held for sale of $1.1 million. PPP loan income was $26,000, $198,000 and $3.5 million for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.

    Loan Growth by Type, Excluding Acquired Loans
    (Dollars in Thousands, Unaudited)
      September 30, June 30, QTD QTD Annualized
      2022 2022 $ Change % Change % Change
    Commercial, excluding PPP loans and
    sold commercial participation loans    		 $2,352,446 $2,310,605 $41,841  1.8% 7.2%
    PPP loans  315  2,343  (2,028) (86.6)% (343.4)%
    Sold commercial participation loans  50,982  51,043  (61) (0.1)% (0.5)%
    Residential mortgage  634,901  608,582  26,319  4.3% 17.2%
    Consumer  899,881  848,749  51,132  6.0% 23.9%
    Subtotal  3,938,525  3,821,322  117,203  3.1% 12.2%
    Loans held for sale  1,852  2,943  (1,091) (37.1)% (147.1)%
    Mortgage warehouse  73,690  116,488  (42,798) (36.7)% (145.8)%
    Total loans $4,014,067 $3,940,753 $73,314  1.9% 7.4%
               
    Total loans, excluding PPP loans and
    sold commercial participation loans    		 $3,962,770 $3,887,367 $75,403  1.9% 7.7%


    Loan Growth by Type, Excluding Acquired Loans
    (Dollars in Thousands, Unaudited)
      September 30, December 31, YTD YTD Annualized
      2022 2021 $ Change % Change % Change
    Commercial, excluding PPP loans and
    sold commercial participation loans    		 $2,352,446 $2,131,644 $220,802  10.4% 13.8%
    PPP loans  315  25,844  (25,529) (98.8)% (132.1)%
    Sold commercial participation loans  50,982  56,457  (5,475) (9.7)% (13.0)%
    Residential mortgage  634,901  594,382  40,519  6.8% 9.1%
    Consumer  899,881  727,259  172,622  23.7% 31.7%
    Subtotal  3,938,525  3,535,586  402,939  11.4% 15.2%
    Loans held for sale  1,852  12,579  (10,727) (85.3)% (114.0)%
    Mortgage warehouse  73,690  109,031  (35,341) (32.4)% (43.3)%
    Total loans $4,014,067 $3,657,196 $356,871  9.8% 13.0%
               
    Total loans, excluding PPP loans and
    sold commercial participation loans    		 $3,962,770 $3,574,895 $387,875  10.8% 14.5%

    Residential mortgage lending activity for the three months ended September 30, 2022 generated $1.4 million in income from the gain on sale of mortgage loans, decreasing $1.1 million from the second quarter of 2022 and $2.6 million from the third quarter of 2021. Total mortgage origination volume for the third quarter of 2022, including loans placed into the portfolio, totaled $110.9 million, representing a decrease of 3.7% from second quarter 2022 levels, and a decrease of 23.2% from the third quarter of 2021. As a percentage of total mortgage loan originations, 6% of the volume was from refinancings and 94% was from loans for new home purchases during the third quarter of 2022. Total origination volume of mortgage loans sold to the secondary market totaled $50.2 million, representing a decrease of 25.4% from the second quarter of 2022 and a decrease of 51.3% from the third quarter of 2021.

    Gain on sale of mortgage loans and mortgage warehousing income was 3.8% of total revenue for the three months ended September 30, 2022, compared to 5.6% for the linked quarter and 9.0% for the three months ended September 30, 2021.

    Deposit Activity

    Total deposit balances of $5.83 billion on September 30, 2022 declined 0.25% compared to $5.85 billion on June 30, 2022.

    Deposit Growth by Type, Excluding Acquired Deposits
    (Dollars in Thousands, Unaudited)
     September 30, June 30, QTD QTD Annualized
     2022 2022 $ Change % Change % Change
    Non–interest bearing$1,315,155 $1,328,213 $(13,058) (1.0)% (4.0)%
    Interest bearing 3,736,798  3,760,890  (24,092) (0.6)% (2.6)%
    Time deposits 778,885  756,482  22,403  3.0% 12.0%
    Total deposits$5,830,838 $5,845,585 $(14,747) (0.3)% (1.0)%

    Expense Management

      Three Months Ended
      September 30,June 30, QTD QTD
      2022
    		  2022  $ Change % Change
    Non–interest Expense        
    Salaries and employee benefits $20,613  $19,957  $656  3.3%
    Net occupancy expenses  3,293   3,190   103  3.2%
    Data processing  2,539   2,607   (68) (2.6)%
    Professional fees  552   283   269  95.1%
    Outside services and consultants  2,855   2,485   370  14.9%
    Loan expense  2,926   2,497   429  17.2%
    FDIC insurance expense  670   775   (105) (13.5)%
    Other losses  398   362   36  9.9%
    Other expense  4,504   4,212   292  6.9%
    Total non–interest expense $38,350  $36,368  $1,982  5.4%
    Annualized non–interest expense to average assets  1.99%  1.95%    

    Total non–interest expense was $2.0 million higher in the third quarter of 2022 when compared to the second quarter of 2022. The increase was primarily due to an increase in salaries and employee benefits of $656,000 from increased health care costs, an increase in loan expense of $429,000 due to amortization of the dealer reserve asset, an increase in outside services and consultants of $370,000, an increase in professional fees of $269,000 and an increase in other expenses of $292,000 due to the amortization of the intangible assets from the solar tax credits.

      Three Months Ended
      September 30, September 30,    
       2022   2021  Adjusted
    Non–interest Expense Actual Acquisition
    Expenses    		 Adjusted Actual Acquisition
    Expenses    		 Adjusted $ Change % Change
    Salaries and employee benefits $20,613  $— $20,613  $18,901  $(25) $18,876  $1,737 9.2%
    Net occupancy expenses  3,293   —  3,293   2,935   (13)  2,922   371 12.7%
    Data processing  2,539   —  2,539   2,526   (7)  2,519   20 0.8%
    Professional fees  552   —  552   522   (53)  469   83 17.7%
    Outside services and consultants  2,855   —  2,855   2,330   (401)  1,929   926 48.0%
    Loan expense  2,926   —  2,926   2,645   —   2,645   281 10.6%
    FDIC insurance expense  670   —  670   279   —   279   391 140.1%
    Other losses  398   —  398   69   (1)  68   330 485.3%
    Other expense  4,504   —  4,504   4,142   (289)  3,853   651 16.9%
    Total non–interest expense $38,350  $— $38,350  $34,349  $(789) $33,560  $4,790 14.3%
    Annualized non–interest expense to average assets  1.99%    1.99%  2.09%    2.05%    

    Total non–interest expense was $4.0 million higher in the third quarter of 2022 when compared to the third quarter of 2021 primarily due to an increase in salaries and employee benefits of $1.7 million and an increase in outside services and consultants expense of $525,000, as well as increases in net occupancy expenses due to additional employees hired and branch locations acquired as a result of the 2021 branch acquisition, FDIC insurance expense, other expense due to the amortization of the intangible assets from the solar tax credits and other losses.

    Annualized non–interest expense as a percent of average assets was 1.99%, 1.95% and 2.09% for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively. Annualized non–interest expense, excluding acquisition expenses, as a percent of average assets was 1.99%, 1.95% and 2.05% for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively. (See the “Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below for these non–GAAP calculations.)

      Nine Months Ended
      September 30, September 30,    
       2022   2021  Adjusted
    Non–interest Expense Actual Acquisition
    Expenses    		 Adjusted Actual Acquisition
    Expenses    		 Adjusted $ Change % Change
    Salaries and employee benefits $60,305  $— $60,305  $53,502  $(25) $53,477  $6,828  12.8%
    Net occupancy expenses  10,044   —  10,044   9,337   (13)  9,324   720  7.7%
    Data processing  7,683   —  7,683   7,290   (17)  7,273   410  5.6%
    Professional fees  1,149   —  1,149   1,654   (104)  1,550   (401) (25.9)%
    Outside services and consultants  7,865   —  7,865   6,252   (588)  5,664   2,201  38.9%
    Loan expense  7,968   —  7,968   8,574   —   8,574   (606) (7.1)%
    FDIC insurance expense  2,170   —  2,170   1,579   —   1,579   591  37.4%
    Other losses  928   —  928   358   (1)  357   571  159.9%
    Other expense  13,216   —  13,216   11,363   (293)  11,070   2,146  19.4%
    Total non–interest expense $111,328  $— $111,328  $99,909  $(1,041) $98,868  $12,460  12.6%
    Annualized non–interest expense to average assets  1.99%    1.99%  2.16%    2.14%    

    Total non–interest expense was $11.4 million higher in the first nine months of 2022 when compared to the first nine months of 2021. The increase was primarily due to higher salaries and employee benefits of $6.8 million due to additional employees hired as a result of the 2021 branch acquisition, higher other expense of $1.9 million, higher outside services and consultants expense of $1.6 million, and was partially offset by a decrease of $606,000 in loan expense and a decrease of $505,000 in professional fees.

    Annualized non–interest expense as a percent of average assets was 1.99% for the first nine months of 2022 compared to 2.16% for the first nine months of 2021. Annualized non–interest expense, excluding acquisition expenses, as a percent of average assets was 1.99% and 2.14% for the nine months ended September 30, 2022 and September 30, 2021, respectively. (See the “Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio” table below for these non–GAAP calculations.)

    Income tax expense totaled $2.0 million for the third quarter of 2022, a decrease of $2.0 million when compared to the second quarter of 2022 and a decrease of $2.0 million when compared to the third quarter of 2021 due to the recognition of solar tax credits as projects were put into service during the quarter, which reduced the effective tax rate to 7.8%.

    Income tax expense totaled $9.5 million for the nine months ended September 30, 2022, a decrease of $1.7 million when compared to the nine months ended September 30, 2021.

    Capital

    The capital resources of the Company and the Bank exceeded regulatory capital ratios for “well capitalized” banks at September 30, 2022. Stockholders’ equity totaled $645.0 million at September 30, 2022 and the ratio of average stockholders’ equity to average assets was 9.25% for the nine months ended September 30, 2022.

    Tangible book value per common share (“TBVPS”) declined $1.76 during the nine months ended September 30, 2022 to $10.82, as unrealized net losses on securities available for sale (“AFS”) of $3.10 per common share, reduced accumulated other comprehensive income (“AOCI”) by $135.0 million in the first nine months of this year.

    The following table presents the actual regulatory capital dollar amounts and ratios of the Company and the Bank as of September 30, 2022.

      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 $760,624 14.46% $420,934 8.00% $552,476 10.50% N/A N/A
    Bank  711,478 13.65%  416,859 8.00%  547,127 10.50% $521,073 10.00%
    Tier 1 capital (to risk–weighted assets)                
    Consolidated  713,301 13.56%  315,701 6.00%  447,242 8.50% N/A N/A
    Bank  664,018 12.74%  312,644 6.00%  442,912 8.50%  416,859 8.00%
    Common equity tier 1 capital (to risk–weighted assets)                
    Consolidated  590,933  11.23%  236,775 4.50%  368,317 7.00% N/A N/A
    Bank  664,018  12.74%  234,483 4.50%  364,751 7.00%  338,698 6.50%
    Tier 1 capital (to average assets)                
    Consolidated  713,301 9.55%  298,740 4.00%  298,740 4.00% N/A N/A
    Bank  664,018 8.84%  300,512 4.00%  300,512 4.00%  375,641 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 repayment, 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 September 30, 2022, in addition to liquidity available from the normal operating, funding, and investing activities of Horizon, the Bank had approximately $639.7 million in unused credit lines with various money center banks, including the FHLB and the Federal Reserve Discount Window. The Bank had approximately $2.1 billion of unpledged investment securities on September 30, 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). 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)
       
      September 30, June 30, March 31, December 31, September 30,
      2022 2022 2022 2021 2021
    Balance sheet:          
    Total assets $7,718,695 $7,640,936 $7,420,328 $7,374,903 $7,534,240
    Interest earning deposits & federal funds sold  7,302  5,646  20,827  502,364  872,540
    Interest earning time deposits  2,814  3,799  4,046  4,782  5,767
    Investment securities  3,017,191  3,093,792  3,118,641  2,713,255  2,438,874
    Commercial loans  2,403,743  2,363,991  2,259,327  2,213,945  2,173,200
    Mortgage warehouse loans  73,690  116,488  105,118  109,031  169,909
    Residential mortgage loans  634,901  608,582  593,372  594,382  603,540
    Consumer loans  899,881  848,749  753,900  727,259  713,432
    Total loans  4,012,215  3,937,810  3,711,717  3,644,617  3,660,081
    Earning assets  7,068,051  7,070,667  6,883,254  6,865,051  7,006,513
    Non–interest bearing deposit accounts  1,315,155  1,328,213  1,325,570  1,360,338  1,324,757
    Interest bearing transaction accounts  3,736,798  3,760,890  3,782,644  3,711,767  3,875,882
    Time deposits  778,885  756,482  743,283  730,886  779,260
    Total deposits  5,830,838  5,845,585  5,851,497  5,802,991  5,979,899
    Borrowings  1,048,091  959,222  728,664  712,739  670,753
    Subordinated notes  58,860  58,823  58,786  58,750  58,713
    Junior subordinated debentures issued to capital trusts  56,966  56,907  56,850  56,785  56,722
    Total stockholders’ equity  644,993  657,865  677,450  723,209  708,542


    Financial Highlights
    (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
      Three Months Ended
      September 30, June 30, March 31, December 31, September 30,
       2022   2022   2022   2021   2021 
    Income statement:          
    Net interest income $53,395  $53,008  $48,171  $49,976  $46,544 
    Credit loss expense (recovery)  (601)  240   (1,386)  (2,071)  1,112 
    Non–interest income  10,188   12,434   14,155   12,828   16,044 
    Non–interest expense  38,350   36,368   36,610   39,370   34,349 
    Income tax expense  2,013   3,975   3,539   4,080   4,056 
    Net income $23,821  $24,859  $23,563  $21,425  $23,071 
               
    Per share data:          
    Basic earnings per share $0.55  $0.57  $0.54  $0.49  $0.53 
    Diluted earnings per share  0.55   0.57   0.54   0.49   0.52 
    Cash dividends declared per common share  0.16   0.16   0.15   0.15   0.15 
    Book value per common share  14.80   15.10   15.55   16.61   16.28 
    Tangible book value per common share  10.82   11.11   11.54   12.58   12.05 
    Market value – high  20.59   19.21   23.45   21.14   18.47 
    Market value – low $16.74  $16.72  $18.67  $18.01  $15.83 
    Weighted average shares outstanding – Basis  43,573,370   43,572,796   43,554,713   43,534,298   43,810,729 
    Weighted average shares outstanding – Diluted  43,703,793   43,684,691   43,734,556   43,733,416   43,958,870 
               
    Key ratios:          
    Return on average assets  1.24%  1.33%  1.31%  1.14%  1.41%
    Return on average common stockholders’ equity  13.89   14.72   13.34   11.81   12.64 
    Net interest margin  3.13   3.19   2.99   2.97   3.17 
    Allowance for credit losses to total loans  1.28   1.33   1.41   1.51   1.55 
    Average equity to average assets  8.91   9.06   9.79   9.64   11.13 
    Efficiency ratio  60.31   55.57   58.74   62.69   54.88 
    Annualized non–interest expense to average assets  1.99   1.95   2.03   2.09   2.09 
    Bank only capital ratios:          
    Tier 1 capital to average assets  8.84   8.85   8.83   8.50   8.38 
    Tier 1 capital to risk weighted assets  12.74   12.87   13.23   13.69   11.86 
    Total capital to risk weighted assets  13.65   13.83   14.25   14.72   12.97 


    Financial Highlights
    (Dollars in Thousands Except Share and Per Share Data and Ratios, Unaudited)
      Nine Months Ended
      September 30, September 30,
       2022   2021 
    Income statement:    
    Net interest income $154,574  $131,714 
    Credit loss (recovery)  (1,747)  (13)
    Non–interest income  36,777   45,124 
    Non–interest expense  111,328   99,909 
    Income tax expense  9,527   11,276 
    Net income $72,243  $65,666 
         
    Per share data:    
    Basic earnings per share $1.66  $1.50 
    Diluted earnings per share  1.65   1.49 
    Cash dividends declared per common share  0.47   0.41 
    Book value per common share  14.80   16.28 
    Tangible book value per common share  10.82   12.05 
    Market value – high  23.45   19.94 
    Market value – low $16.72  $15.43 
    Weighted average shares outstanding – Basis  43,567,028   43,893,194 
    Weighted average shares outstanding – Diluted  43,699,035   44,047,043 
         
    Key ratios:    
    Return on average assets  1.29%  1.42%
    Return on average common stockholders’ equity  13.97   12.37 
    Net interest margin  3.03   3.20 
    Allowance for credit losses to total loans  1.28   1.55 
    Average equity to average assets  9.25   11.45 
    Efficiency ratio  58.18   56.50 
    Annualized non–interest expense to average assets  1.99   2.16 
    Bank only capital ratios:    
    Tier 1 capital to average assets  8.84   8.38 
    Tier 1 capital to risk weighted assets   12.74   11.86 
    Total capital to risk weighted assets  13.65   12.97 


    Financial Highlights
    (Dollars in Thousands Except Ratios, Unaudited)
       
      September 30, June 30, March 31, December 31, September 30,
       2022   2022   2022   2021   2021 
    Loan data:          
    Substandard loans $57,932  $59,377  $57,928  $56,968  $91,317 
    30 to 89 days delinquent  6,970   6,739   6,358   8,536   3,997 
               
    Non–performing loans:          
    90 days and greater delinquent – accruing interest  193   210   107   145   200 
    Trouble debt restructures – accruing interest  2,529   2,535   2,372   2,391   2,433 
    Trouble debt restructures – non–accrual  1,665   1,345   1,501   1,521   1,604 
    Non–accrual loans  14,771   16,116   16,133   14,962   25,137 
    Total non–performing loans $19,158  $20,206  $20,113  $19,019  $29,374 
    Non–performing loans to total loans  0.48%  0.51%  0.54%  0.53%  0.80%


    Allocation of the Allowance for Credit Losses
    (Dollars in Thousands, Unaudited)
       
      September 30, June 30, March 31, December 31, September 30,
      2022 2022 2022 2021 2021
    Commercial $33,806 $34,802 $37,789 $40,775 $43,121
    Residential mortgage  5,137  4,422  4,351  3,856  3,737
    Mortgage warehouse  1,024  1,067  1,055  1,059  1,054
    Consumer  11,402  12,059  9,313  8,596  8,867
    Total $51,369 $52,350 $52,508 $54,286 $56,779


    Net Charge–offs (Recoveries)
    (Dollars in Thousands Except Ratios, Unaudited)
       
      September 30, June 30, March 31, December 31, September 30,
       2022   2022   2022   2021   2021 
    Commercial $51  $(75) $38  $926  $(25)
    Residential mortgage  (75)  40   (10)  126   (29)
    Mortgage warehouse  —   —   —   —   — 
    Consumer  162   319   108   360   36 
    Total $138  $284  $136  $1,412  $(18)
    Percent of net charge–offs (recoveries) to average loans outstanding for the period  0.00%  0.01%  0.00%  0.04%  0.00%


    Total Non–performing Loans
    (Dollars in Thousands Except Ratios, Unaudited)
       
      September 30, June 30, March 31, December 31, September 30,
       2022   2022   2022   2021   2021 
    Commercial $7,199  $8,008  $7,844  $7,509  $16,121 
    Residential mortgage  8,047   8,469   8,584   8,005   8,641 
    Mortgage warehouse  —   —   —   —   — 
    Consumer  3,912   3,729   3,685   3,505   4,612 
    Total $19,158  $20,206  $20,113  $19,019  $29,374 
    Non–performing loans to total loans  0.48%  0.51%  0.54%  0.53%  0.80%


    Other Real Estate Owned and Repossessed Assets
    (Dollars in Thousands, Unaudited)
       
      September 30, June 30, March 31, December 31, September 30,
      2022 2022 2022 2021 2021
    Commercial $3,206 $1,414 $2,245 $2,861 $2,861
    Residential mortgage  22  —  170  695  117
    Mortgage warehouse  —  —  —  —  —
    Consumer  14  58  5  5  29
    Total $3,242 $1,472 $2,420 $3,561 $3,007
                    


    Average Balance Sheets
    (Dollars in Thousands, Unaudited)
      Three Months Ended Three Months Ended
      September 30, 2022 September 30, 2021
      Average
    Balance    		 Interest Average
    Rate    		 Average
    Balance    		 Interest Average
    Rate
    Assets            
    Interest earning assets            
    Federal funds sold $4,201  $24 2.27% $310,180  $119 0.15%
    Interest earning deposits  9,994   41 1.63%  26,352   39 0.59%
    Investment securities – taxable  1,728,197   8,436 1.94%  1,063,177   4,407 1.64%
    Investment securities – non–taxable(1)  1,384,249   7,478 2.71%  1,108,503   5,911 2.68%
    Loans receivable(2) (3)  3,910,889   47,051 4.79%  3,524,876   40,392 4.56%
    Total interest earning assets  7,037,530   63,030 3.68%  6,033,088   50,868 3.46%
    Non–interest earning assets            
    Cash and due from banks  99,221       87,799     
    Allowance for credit losses  (52,303)      (55,703)    
    Other assets  550,654       442,489     
    Total average assets $7,635,102      $6,507,673     
                 
    Liabilities and Stockholders’ Equity            
    Interest bearing liabilities            
    Interest bearing deposits $4,478,741  $4,116 0.36% $3,831,632  $1,808 0.19%
    Borrowings  813,873   3,756 1.83%  472,551   1,035 0.87%
    Repurchase agreements  141,283   139 0.39%  125,776   40 0.13%
    Subordinated notes  58,836   880 5.93%  58,689   880 5.95%
    Junior subordinated debentures issued to capital trusts  56,928   744 5.19%  56,684   561 3.93%
    Total interest bearing liabilities  5,549,661   9,635 0.69%  4,545,332   4,324 0.38%
    Non–interest bearing liabilities            
    Demand deposits  1,351,857       1,180,890     
    Accrued interest payable and other liabilities  53,208       57,039     
    Stockholders’ equity  680,376       724,412     
    Total average liabilities and stockholders’ equity $7,635,102      $6,507,673     
                 
    Net interest income / spread   $53,395 2.99%   $46,544 3.08%
    Net interest income as a percent of average interest earning assets(1)     3.13%     3.17%
                 
    (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)
      Nine Months Ended Nine Months Ended
      September 30, 2022 September 30, 2021
      Average
    Balance    		 Interest Average
    Rate    		 Average
    Balance    		 Interest Average
    Rate
    Assets            
    Interest earning assets            
    Federal funds sold $82,667  $131 0.21% $312,359  $284 0.12%
    Interest earning deposits  15,404   93 0.81%  27,157   128 0.63%
    Investment securities – taxable  1,715,478   24,499 1.91%  708,519   8,229 1.55%
    Investment securities – non–taxable(1)  1,346,173   21,482 2.70%  1,040,447   16,790 2.73%
    Loans receivable(2) (3)  3,763,502   126,479 4.51%  3,624,393   120,446 4.46%
    Total interest earning assets  6,923,224   172,684 3.45%  5,712,875   145,877 3.53%
    Non–interest earning assets            
    Cash and due from banks  100,067       85,855     
    Allowance for credit losses  (53,038)      (56,885)    
    Other assets  503,281       455,181     
    Total average assets $7,473,534      $6,197,026     
                 
    Liabilities and Stockholders’ Equity            
    Interest bearing liabilities            
    Interest bearing deposits $4,499,441  $7,289 0.22% $3,679,970  $6,204 0.23%
    Borrowings  644,803   6,209 1.29%  391,373   3,522 1.20%
    Repurchase agreements  140,837   216 0.21%  118,891   118 0.13%
    Subordinated notes  58,800   2,641 6.01%  58,653   2,641 6.02%
    Junior subordinated debentures issued to capital trusts  56,869   1,755 4.13%  56,628   1,678 3.96%
    Total interest bearing liabilities  5,400,750   18,110 0.45%  4,305,515   14,163 0.44%
    Non–interest bearing liabilities            
    Demand deposits  1,336,912       1,128,173     
    Accrued interest payable and other liabilities  44,343       53,751     
    Stockholders’ equity  691,529       709,587     
    Total average liabilities and stockholders’ equity $7,473,534      $6,197,026     
                 
    Net interest income / spread   $154,574 3.00%   $131,714 3.09%
    Net interest income as a percent of average interest earning assets(1)     3.03%     3.20%
                 
    (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)
         
      September 30,
    2022    		 December 31,
    2021
      (Unaudited)  
    Assets    
    Cash and due from banks $109,659  $593,508
    Interest earning time deposits  2,814   4,782
    Investment securities, available for sale  985,655   1,160,812
    Investment securities, held to maturity (fair value $1,640,589 and $1,559,991)  2,031,536   1,552,443
    Loans held for sale  1,852   12,579
    Loans, net of allowance for credit losses of $51,369 and $54,286  3,960,846   3,590,331
    Premises and equipment, net  92,356   93,441
    Federal Home Loan Bank stock  26,677   24,440
    Goodwill  155,211   154,572
    Other intangible assets  18,164   20,941
    Interest receivable  30,096   26,137
    Cash value of life insurance  145,439   97,150
    Other assets  158,390   80,753
    Total assets $7,718,695  $7,411,889
         
    Liabilities    
    Deposits    
    Non–interest bearing $1,315,155  $1,360,338
    Interest bearing  4,515,683   4,442,653
    Total deposits  5,830,838   5,802,991
    Borrowings  1,048,091   712,739
    Subordinated notes  58,860   58,750
    Junior subordinated debentures issued to capital trusts  56,966   56,785
    Interest payable  1,961   2,235
    Other liabilities  76,986   55,180
    Total liabilities  7,073,702   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 43,932,389 and 43,766,931 shares,
    Outstanding 43,574,151 and 43,547,942 shares    		  —   —
    Additional paid–in capital  352,837   352,122
    Retained earnings  415,277   363,742
    Accumulated other comprehensive income (loss)  (123,121)  7,345
    Total stockholders’ equity  644,993   723,209
    Total liabilities and stockholders’ equity $7,718,695  $7,411,889
            


    Condensed Consolidated Statements of Income
    (Dollars in Thousands Except Per Share Data, Unaudited)
      Three Months Ended
      September 30, June 30, March 31, December 31, September 30,
       2022  2022  2022   2021  2021
    Interest income          
    Loans receivable $47,051  $41,549 $37,879  $41,171  $40,392
    Investment securities – taxable  8,501   8,716  7,506   6,491   4,565
    Investment securities – non–taxable  7,478   7,307  6,697   6,456   5,911
    Total interest income  63,030   57,572  52,082   54,118   50,868
    Interest expense          
    Deposits  4,116   1,677  1,496   1,663   1,808
    Borrowed funds  3,895   1,450  1,080   1,061   1,075
    Subordinated notes  880   881  880   881   880
    Junior subordinated debentures issued to capital trusts  744   556  455   537   561
    Total interest expense  9,635   4,564  3,911   4,142   4,324
    Net interest income  53,395   53,008  48,171   49,976   46,544
    Credit loss expense (recovery)  (601)  240  (1,386)  (2,071)  1,112
    Net interest income after credit loss expense (recovery)  53,996   52,768  49,557   52,047   45,432
    Non–interest Income          
    Service charges on deposit accounts  3,023   2,833  2,795   2,510   2,291
    Wire transfer fees  148   170  159   205   210
    Interchange fees  3,089   3,582  2,780   3,082   2,587
    Fiduciary activities  1,203   1,405  1,503   1,591   2,124
    Gain on sale of mortgage loans  1,441   2,501  2,027   4,167   4,088
    Mortgage servicing income net of impairment  355   319  3,489   300   336
    Increase in cash value of bank owned life insurance  814   519  510   547   534
    Death benefit on bank owned life insurance  —   644  —   —   517
    Other income  115   461  892   426   3,357
    Total non–interest income  10,188   12,434  14,155   12,828   16,044
    Non–interest expense          
    Salaries and employee benefits  20,613   19,957  19,735   20,549   18,901
    Net occupancy expenses  3,293   3,190  3,561   3,204   2,935
    Data processing  2,539   2,607  2,537   2,672   2,526
    Professional fees  552   283  314   562   522
    Outside services and consultants  2,855   2,485  2,525   2,197   2,330
    Loan expense  2,926   2,497  2,545   2,803   2,645
    FDIC insurance expense  670   775  725   798   279
    Other losses  398   362  168   1,925   69
    Other expenses  4,504   4,212  4,500   4,660   4,142
    Total non–interest expense  38,350   36,368  36,610   39,370   34,349
    Income before income taxes  25,834   28,834  27,102   25,505   27,127
    Income tax expense  2,013   3,975  3,539   4,080   4,056
    Net income $23,821  $24,859 $23,563  $21,425  $23,071
    Basic earnings per share $0.55  $0.57 $0.54  $0.49  $0.53
    Diluted earnings per share  0.55   0.57  0.54   0.49   0.52
                       


    Condensed Consolidated Statements of Income
    (Dollars in Thousands Except Per Share Data, Unaudited)
      Nine Months Ended
      September 30, September 30,
       2022   2021 
    Interest income    
    Loans receivable $126,479  $120,446 
    Investment securities – taxable  24,723   8,641 
    Investment securities – non–taxable  21,482   16,790 
    Total interest income  172,684   145,877 
    Interest expense    
    Deposits  7,289   6,204 
    Borrowed funds  6,425   3,640 
    Subordinated notes  2,641   2,641 
    Junior subordinated debentures issued to capital trusts  1,755   1,678 
    Total interest expense  18,110   14,163 
    Net interest income  154,574   131,714 
    Credit loss (recovery)  (1,747)  (13)
    Net interest income after credit loss (recovery)  156,321   131,727 
    Non–interest Income    
    Service charges on deposit accounts  8,651   6,682 
    Wire transfer fees  477   687 
    Interchange fees  9,451   7,819 
    Fiduciary activities  4,111   5,828 
    Gains on sale of investment securities  —   914 
    Gain on sale of mortgage loans  5,969   14,996 
    Mortgage servicing income net of impairment  4,163   2,052 
    Increase in cash value of bank owned life insurance  1,843   1,547 
    Death benefit on bank owned life insurance  644   783 
    Other income  1,468   3,816 
    Total non–interest income  36,777   45,124 
    Non–interest expense    
    Salaries and employee benefits  60,305   53,502 
    Net occupancy expenses  10,044   9,337 
    Data processing  7,683   7,290 
    Professional fees  1,149   1,654 
    Outside services and consultants  7,865   6,252 
    Loan expense  7,968   8,574 
    FDIC insurance expense  2,170   1,579 
    Other losses  928   358 
    Other expenses  13,216   11,363 
    Total non–interest expense  111,328   99,909 
    Income before income taxes  81,770   76,942 
    Income tax expense  9,527   11,276 
    Net income $72,243  $65,666 
    Basic earnings per share $1.66  $1.50 
    Diluted earnings per share  1.65   1.49 
             

    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, 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, return on average tangible equity, and pre–tax, pre–provision net income. 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 Nine Months Ended
      September 30, 2022 June 30,
    2022
    		  March 31,
    2022    		  December 31,
    2021    		   September 30,
    2021    		   September 30,
    2022    		   September 30,
    2021    		 
    Net income as reported $23,821 $24,859  $23,563 $21,425  $23,071  $72,243  $65,666 
    Acquisition expenses  —  —   —  884   799   —   1,041 
    Tax effect  —  —   —  (184)  (166)  —   (217)
    Net income excluding acquisition expenses  23,821  24,859   23,563  22,125   23,704   72,243   66,490 
    Credit loss expense acquired loans  —  —   —  —   2,034   —   2,034 
    Tax effect  —  —   —  —   (427)  —   (427)
    Net income excluding credit loss expense acquired loans  23,821  24,859   23,563  22,125   25,311   72,243   68,097 
    Gain on sale of ESOP trustee accounts  —  —   —  —   (2,329)  —   (2,329)
    Tax effect  —  —   —  —   489   —   489 
    Net income excluding gain on sale of ESOP trustee accounts  23,821  24,859   23,563  22,125   23,471   72,243   66,257 
    DOL ESOP settlement expenses  —  —   —  1,900   —   —   — 
    Tax effect  —  —   —  (315)  —   —   — 
    Net income excluding DOL ESOP settlement expenses  23,821  24,859   23,563  23,710   23,471   72,243   66,257 
    (Gain) / loss on sale of investment securities  —  —   —  —   —   —   (914)
    Tax effect  —  —   —  —   —   —   192 
    Net income excluding (gain) / loss on sale of investment securities  23,821  24,859   23,563  23,710   23,471   72,243   65,535 
    Death benefit on bank owned life insurance (“BOLI”)  —  (644)  —  —   (517)  (644)  (783)
    Net income excluding death benefit on BOLI  23,821  24,215   23,563  23,710   22,954   71,599   64,752 
    Prepayment penalties on borrowings  —  —   —  —   —   —   125 
    Tax effect  —  —   —  —   —   —   (26)
    Net income excluding prepayment penalties on borrowings  23,821  24,215   23,563  23,710   22,954   71,599   64,851 
    Adjusted net income $23,821 $24,215  $23,563 $23,710  $22,954  $71,599  $64,851 


    Non–GAAP Reconciliation of Diluted Earnings per Share
    (Dollars in Thousands, Unaudited)
      Three Months Ended Nine Months Ended
      September 30  
    2022    		  June 30,
    2022    		   March 31,
    2022    		  December 31,
    2021    		   September 30,
    2021    		   September 30,
    2022    		   September 30,
    2021    		 
    Diluted earnings per share (“EPS”) as reported $0.55 $0.57  $0.54 $0.49  $0.52  $1.65  $1.49 
    Acquisition expenses  —  —   —  0.02   0.02   —   0.02 
    Tax effect  —  —   —  —   —   —   — 
    Diluted EPS excluding acquisition expenses  0.55  0.57   0.54  0.51   0.54   1.65   1.51 
    Credit loss expense acquired loans  —  —   —  —   0.05   —   0.05 
    Tax effect  —  —   —  —   (0.01)  —   (0.01)
    Diluted EPS excluding credit loss expense acquired loans  0.55  0.57   0.54  0.51   0.58   1.65   1.55 
    Gain on sale of ESOP trustee accounts  —  —   —  —   (0.05)  —   (0.05)
    Tax effect  —  —   —  —   0.01   —   0.01 
    Diluted EPS excluding gain on sale of ESOP trustee accounts  0.55  0.57   0.54  0.51   0.54   1.65   1.51 
    DOL ESOP settlement expenses  —  —   —  0.04   —   —   — 
    Tax effect  —  —   —  (0.01)  —   —   — 
    Diluted EPS excluding DOL ESOP settlement expenses  0.55  0.57   0.54  0.54   0.54   1.65   1.51 
    (Gain) / loss on sale of investment securities  —  —   —  —   —   —   (0.02)
    Tax effect  —  —   —  —   —   —   — 
    Diluted EPS excluding (gain) / loss on sale of investment securities  0.55  0.57   0.54  0.54   0.54   1.65   1.49 
    Death benefit on bank owned life insurance (“BOLI”)  —  (0.01)  —  —   (0.02)  (0.01)  (0.03)
    Diluted EPS excluding death benefit on BOLI  0.55  0.56   0.54  0.54   0.52   1.64   1.46 
    Prepayment penalties on borrowings  —  —   —  —   —   —   — 
    Tax effect  —  —   —  —   —   —   — 
    Diluted EPS excluding prepayment penalties on borrowings  0.55  0.56   0.54  0.54   0.52   1.64   1.46 
    Adjusted diluted EPS $0.55 $0.56  $0.54 $0.54  $0.52  $1.64  $1.46 


    Non–GAAP Reconciliation of Pre–Tax, Pre–Provision Net Income
    (Dollars in Thousands, Unaudited)
      Three Months Ended Nine Months Ended
      September 30, June 30, March 31, December 31, September 30, September 30, September 30,
       2022   2022   2022   2021   2021   2022   2021 
    Pre–tax income $25,834  $28,834  $27,102  $25,505  $27,127  $81,770  $76,942 
    Credit loss expense (recovery)  (601)  240   (1,386)  (2,071)  1,112   (1,747)  (13)
    Pre–tax, pre–provision net income $25,233  $29,074  $25,716  $23,434  $28,239  $80,023  $76,929 
                   
    Pre–tax, pre–provision net income $25,233  $29,074  $25,716  $23,434  $28,239  $80,023  $76,929 
    Acquisition expenses  —   —   —   884   799   —   1,041 
    Gain on sale of ESOP trustee accounts  —   —   —   —   (2,329)  —   (2,329)
    DOL ESOP settlement expenses  —   —   —   1,900   —   —   — 
    (Gain) / loss on sale of investment securities  —   —   —   —   —   —   (914)
    Death benefit on BOLI  —   (644)  —   —   (517)  (644)  (783)
    Prepayment penalties on borrowings  —   —   —   —   —   —   125 
    Adjusted pre–tax, pre–provision net income $25,233  $28,430  $25,716  $26,218  $26,192  $79,379  $73,944 


    Non–GAAP Reconciliation of Net Interest Margin
    (Dollars in Thousands, Unaudited)
      Three Months Ended Nine Months Ended
      September 30, June 30, March 31, December 31, September 30, September 30, September 30,
       2022   2022   2022   2021   2021   2022   2021 
    Net interest income as reported $53,395  $53,008  $48,171  $49,976  $46,544  $154,574  $131,714 
    Average interest earning assets  7,037,530   6,927,310   6,800,549   6,938,258   6,033,088   6,923,224   5,712,875 
    Net interest income as a percentage of average interest earning assets (“Net Interest Margin”)  3.13%  3.19%  2.99%  2.97%  3.17%  3.03%  3.20%
                   
    Net interest income as reported $53,395  $53,008  $48,171  $49,976  $46,544  $154,574  $131,714 
    Acquisition–related purchase accounting adjustments (“PAUs”)  (906)  (1,223)  (916)  (1,819)  (875)  (3,045)  (2,684)
    Prepayment penalties on borrowings  —   —   —   —   —   —   125 
    Adjusted net interest income $52,489  $51,785  $47,255  $48,157  $45,669  $151,529  $129,030 
    Adjusted net interest margin  3.08%  3.12%  2.93%  2.86%  3.12%  2.97%  3.14%


    Non–GAAP Reconciliation of Tangible Stockholders’ Equity and Tangible Book Value per Share
    (Dollars in Thousands, Unaudited)
       
      September 30, June 30, March 31, December 31, September 30,
      2022 2022 2022 2021 2021
    Total stockholders’ equity $644,993 $657,865 $677,450 $723,209 $708,542
    Less: Intangible assets  173,375  173,662  174,588  175,513  183,938
    Total tangible stockholders’ equity $471,618 $484,203 $502,862 $547,696 $524,604
    Common shares outstanding  43,574,151  43,572,796  43,572,796  43,547,942  43,520,694
    Book value per common share $14.80 $15.10 $15.55 $16.61 $16.28
    Tangible book value per common share $10.82 $11.11 $11.54 $12.58 $12.05


    Non–GAAP Calculation and Reconciliation of Efficiency Ratio and Adjusted Efficiency Ratio
    (Dollars in Thousands, Unaudited)
      Three Months Ended Nine Months Ended
      September 30, June 30, March 31, December 31, September 30, September 30, September 30,
       2022   2022   2022   2021   2021   2022   2021 
    Non–interest expense as reported $38,350  $36,368  $36,610  $39,370  $34,349  $111,328  $99,909 
    Net interest income as reported  53,395   53,008   48,171   49,976   46,544   154,574   131,714 
    Non–interest income as reported $10,188  $12,434  $14,155  $12,828  $16,044  $36,777  $45,124 
    Non–interest expense / (Net interest income + Non–interest income) (“Efficiency Ratio”)  60.31%  55.57%  58.74%  62.69%  54.88%  58.18%  56.50%
                   
    Non–interest expense as reported $38,350  $36,368  $36,610  $39,370  $34,349  $111,328  $99,909 
    Acquisition expenses  —   —   —   (884)  (799)  —   (1,041)
    DOL ESOP settlement expenses  —   —   —   (1,900)  —   —   — 
    Non–interest expense excluding acquisition and DOL ESOP settlement expenses  38,350   36,368   36,610   36,586   33,550   111,328   98,868 
    Net interest income as reported  53,395   53,008   48,171   49,976   46,544   154,574   131,714 
    Prepayment penalties on borrowings  —   —   —   —   —   —   125 
    Net interest income excluding
    prepayment penalties on
    borrowings    		  53,395   53,008   48,171   49,976   46,544   154,574   131,839 
    Non–interest income as reported  10,188   12,434   14,155   12,828   16,044   36,777   45,124 
    Gain on sale of ESOP trustee accounts  —   —   —   —   (2,329)  —   (2,329)
    (Gain) / loss on sale of investment securities  —   —   —   —   —   —   (914)
    Death benefit on BOLI  —   (644)  —   —   (517)  (644)  (783)
    Non–interest income excluding (gain) / loss on sale of investment securities and death benefit on BOLI $10,188  $11,790  $14,155  $12,828  $13,198  $36,133  $41,098 
    Adjusted efficiency ratio  60.31%  56.13%  58.74%  58.25%  56.16%  58.38%  57.17%


    Non–GAAP Reconciliation of Return on Average Assets
    (Dollars in Thousands, Unaudited)
      Three Months Ended Nine Months Ended
      September 30, June 30, March 31, December 31, September 30, September 30, September 30,
       2022   2022   2022   2021   2021   2022   2021 
    Average assets $7,635,102  $7,476,238  $7,319,675  $7,461,343  $6,507,673  $7,473,534  $6,197,026 
    Return on average assets (“ROAA”) as reported  1.24%  1.33%  1.31%  1.14%  1.41%  1.29%  1.42%
    Acquisition expenses  —   —   —   0.05   0.05   —   0.02 
    Tax effect  —   —   —   (0.01)  (0.01)  —   — 
    ROAA excluding acquisition expenses  1.24   1.33   1.31   1.18   1.45   1.29   1.44 
    Credit loss expense acquired loans  —   —   —   —   0.12   —   0.04 
    Tax effect  —   —   —   —   (0.03)  —   (0.01)
    ROAA excluding credit loss expense on acquired loans  1.24   1.33   1.31   1.18   1.54   1.29   1.47 
    Gain on sale of ESOP trustee accounts  —   —   —   —   (0.14)  —   (0.05)
    Tax effect  —   —   —   —   0.03   —   0.01 
    ROAA excluding gain on sale of ESOP trustee accounts  1.24   1.33   1.31   1.18   1.43   1.29   1.43 
    DOL ESOP settlement expenses  —   —   —   0.10   —   —   — 
    Tax effect  —   —   —   (0.02)  —   —   — 
    ROAA excluding DOL ESOP settlement expenses  1.24   1.33   1.31   1.26   1.43   1.29   1.43 
    (Gain) / loss on sale of investment securities  —   —   —   —   —   —   (0.02)
    Tax effect  —   —   —   —   —   —   — 
    ROAA excluding (gain) / loss on sale of investment securities  1.24   1.33   1.31   1.26   1.43   1.29   1.41 
    Death benefit on BOLI  —   (0.03)  —   —   (0.03)  (0.01)  (0.02)
    ROAA excluding death benefit on BOLI  1.24   1.30   1.31   1.26   1.40   1.28   1.39 
    Prepayment penalties on borrowings  —   —   —   —   —   —   — 
    Tax effect  —   —   —   —   —   —   — 
    ROAA excluding prepayment penalties on borrowings  1.24   1.30   1.31   1.26   1.40   1.28   1.39 
    Adjusted ROAA  1.24%  1.30%  1.31%  1.26%  1.40%  1.28%  1.39%


    Non–GAAP Reconciliation of Return on Average Common Equity
    (Dollars in Thousands, Unaudited)
      Three Months Ended Nine Months Ended
      September 30, June 30, March 31, December 31, September 30, September 30, September 30,
       2022   2022   2022   2021   2021   2022   2021 
    Average common equity $680,376  $677,299  $716,341  $719,643  $724,412  $691,529  $709,587 
    Return on average common equity (“ROACE”) as reported  13.89%  14.72%  13.34%  11.81%  12.64%  13.97%  12.37%
    Acquisition expenses  —   —   —   0.49   0.44   —   0.20 
    Tax effect  —   —   —   (0.10)  (0.09)  —   (0.04)
    ROACE excluding acquisition expenses  13.89   14.72   13.34   12.20   12.99   13.97   12.53 
    Credit loss expense acquired loans  —   —   —   —   1.11   —   0.38 
    Tax effect  —   —   —   —   (0.23)  —   (0.08)
    ROACE excluding credit loss expense acquired loans  13.89   14.72   13.34   12.20   13.87   13.97   12.83 
    Gain on sale of ESOP trustee accounts  —   —   —   —   (1.28)  —   (0.44)
    Tax effect  —   —   —   —   0.27   —   0.09 
    ROACE excluding gain on sale of ESOP trustee accounts  13.89   14.72   13.34   12.20   12.86   13.97   12.48 
    DOL ESOP settlement expenses  —   —   —   1.05   —   —   — 
    Tax effect  —   —   —   (0.17)  —   —   — 
    ROACE excluding DOL ESOP settlement expenses  13.89   14.72   13.34   13.08   12.86   13.97   12.48 
    (Gain) / loss on sale of investment securities  —   —   —   —   —   —   (0.17)
    Tax effect  —   —   —   —   —   —   0.04 
    ROACE excluding (gain) / loss on sale of investment securities  13.89   14.72   13.34   13.08   12.86   13.97   12.35 
    Death benefit on BOLI  —   (0.38)  —   —   (0.28)  (0.12)  (0.15)
    ROACE excluding death benefit on BOLI  13.89   14.34   13.34   13.08   12.58   13.85   12.20 
    Prepayment penalties on borrowings  —   —   —   —   —   —   0.02 
    Tax effect  —   —   —   —   —   —   — 
    ROACE excluding prepayment penalties on borrowings  13.89%  14.34%  13.34%  13.08%  12.58%  13.85%  12.22%
    Adjusted ROACE  13.89%  14.34%  13.34%  13.08%  12.58%  13.85%  12.22%


    Non–GAAP Reconciliation of Return on Average Tangible Equity
    (Dollars in Thousands, Unaudited)
      Three Months Ended Nine Months Ended
      September 30, June 30, March 31, December 31, September 30, September 30, September 30,
       2022   2022   2022   2021   2021   2022   2021 
    Average common equity $680,376  $677,299  $716,341  $719,643  $724,412  $691,529  $709,587 
    Less: Average intangible assets  175,321   175,321   176,356   179,594   174,920   175,836   174,537 
    Average tangible equity $505,055  $501,978  $539,985  $540,049  $549,492  $515,693  $535,050 
    Return on average tangible equity (“ROATE”) as reported  18.71%  19.86%  17.70%  15.74%  16.66%  18.73%  16.41%
    Acquisition expenses  —   —   —   0.65   0.58   —   0.26 
    Tax effect  —   —   —   (0.14)  (0.12)  —   (0.06)
    ROATE excluding acquisition expenses  18.71   19.86   17.70   16.25   17.12   18.73   16.61 
    Credit loss expense acquired loans  —   —   —   —   1.47   —   0.51 
    Tax effect  —   —   —   —   (0.31)  —   (0.11)
    ROATE excluding credit loss expense acquired loans  18.71   19.86   17.70   16.25   18.28   18.73   17.01 
    Gain on sale of ESOP trustee accounts  —   —   —   —   (1.68)  —   (0.58)
    Tax effect  —   —   —   —   0.35   —   0.13 
    ROATE excluding gain on sale of ESOP trustee accounts  18.71   19.86   17.70   16.25   16.95   18.73   16.56 
    DOL ESOP settlement expenses  —   —   —   1.40   —   —   — 
    Tax effect  —   —   —   (0.23)  —   —   — 
    ROATE excluding DOL ESOP settlement expenses  18.71   19.86   17.70   17.42   16.95   18.73   16.56 
    (Gain) / loss on sale of investment securities  —   —   —   —   —   —   (0.23)
    Tax effect  —   —   —   —   —   —   0.05 
    ROATE excluding (gain) / loss on sale of investment securities  18.71   19.86   17.70   17.42   16.95   18.73   16.38 
    Death benefit on BOLI  —   (0.51)  —   —   (0.37)  (0.17)  (0.20)
    ROATE excluding death benefit on BOLI  18.71   19.35   17.70   17.42   16.58   18.56   16.18 
    Prepayment penalties on borrowings  —   —   —   —   —   —   0.03 
    Tax effect  —   —   —   —   —   —   (0.01)
    ROATE excluding prepayment penalties on borrowings  18.71%  19.35%  17.70%  17.42%  16.58%  18.56%  16.20%
    Adjusted ROATE  18.71%  19.35%  17.70%  17.42%  16.58%  18.56%  16.20%
                                 

    Earnings Conference Call

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

    Participants may access the live conference call on October 27, 2022 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 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 November 3, 2022. The replay may be accessed by dialing 877–344–7529 from the United States, 855–669–9658 from Canada or 412–317–0088 from other international locations, and entering the access code 3260518.

    About Horizon Bancorp, Inc.

    Horizon Bancorp, Inc. (NASDAQ GS: HBNC) with $7.7 billion in assets, is the 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:October 26, 2022

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